Having many times found the Police Pension Scheme Cash Equivalent Transfer Value (CETV) calculated on a basis that often understates the true value of the benefits I was surprised when a case demonstrating the exact opposite passed across my desk recently.
I was asked to prepare figures for a 48 year old serving police officer who after 20 years of marriage was now divorcing. A current salary of around £33,000 and 29 years of service meant that he had accrued £21,200, which after 30 years would be £22,000. The CETV by the scheme was calculated on the basis that the police officer would take advantage of his entitlement to retire on his 50th birthday.
The initial resolution seemed reasonable with both parties agreeing to a 33% pension share. Having consulted his solicitor however, the officer realised that his financial circumstances would be so altered that retiring at 50 or even 60 would now be highly unlikely.
The figures produced proved alarming where if the officer should stay in service until 60 he would see a reduction in the benefits of almost 55% instead of a third. Rather than a reduction of £7,000 it would be decreased by £11,600!
No matter what the outcome, it proves that a second opinion in these circumstances can be crucial to make informed decisions that enable both parties to find a resolution that meets both their interests. The situation is rarely as clear cut as it seems!!