Unfair method of splitting pensions can add to the pain of divorce | Letters

Your article on the impact of the escalating cost of living on divorce settlements (Unhappy couples staying put due to cost of living crisis, say divorce lawyers, 23 September) provides a timely reminder of the financial inequities facing many separating couples.

As a pensions expert, I have regularly encountered a particular imbalance 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.

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.

Divorce is a traumatic enough experience. This fundamental flaw in the legal process compounds unfairness and is both unnecessary and easily rectified. The government should address this urgently to avoid sleepwalking into another pensions scandal.
Richard Nobbs
Excalibur Actuaries