A pensions expert has highlighted a fundamental flaw in the method used to split pension assets during divorce, which can lead to significant undervaluing of transferred assets. Richard Nobbs, from Excalibur Actuaries, stated that an 'inherent unfairness' persists in how many such arrangements are implemented, 25 years after pension savings were first included in divorce settlements.
Nobbs explained that when one partner has a defined benefit pension, the allocation of these assets on divorce is often based on an equivalent cash value at the time of divorce, known as 'external sharing'. This method can result in the undervaluing of pension assets transferred, particularly in private sector pensions, potentially by thousands of pounds.
Nobbs called for urgent government action to address this issue, describing it as an 'unnecessary and easily rectified' flaw in the legal process that compounds the difficulties of divorce.