Pensions expert Richard Nobbs has drawn attention to a fundamental flaw in the way pension assets are split on divorce, calling on the government to address the issue urgently.
Unfairness in pension splitting
Writing in response to a recent article on the impact of the rising cost of living on divorce settlements, Nobbs highlighted a particular imbalance he regularly encounters in the splitting of pension assets on divorce.
Although the last Labour government enabled pension savings to be taken into account in divorce settlements, there remains, 25 years on, an inherent unfairness in the way many such arrangements are implemented, he said.
External sharing undervalues assets
Where one partner, usually the husband, has built up valuable pension entitlements through a defined benefit pension, the allocation of those assets on divorce is often based on an equivalent cash value at the point of divorce, known as 'external sharing'.
In thousands of such cases, especially those involving private sector pensions, this leads to the undervaluing of pension assets transferred, usually to the wife and, in some cases, by many thousands of pounds.
Call for urgent action
Nobbs, of Excalibur Actuaries, said divorce is a traumatic enough experience and that this fundamental flaw in the legal process compounds unfairness and is both unnecessary and easily rectified.
He urged the government to address this urgently to avoid 'sleepwalking into another pensions scandal'.
