If you or your former partner have a public sector pension (for example NHS, teachers, civil service, police, local government, judiciary or armed forces), there has recently been a change that may affect your divorce finances.
What has changed?
The Government has increased something called the SCAPE rate (Superannuation Contributions Adjusted for Past Experience). It is a rate used by the government based on assumptions and what has happened in the past in public sector pensions, to work out how much public sector pensions cost today) from 1.7% to 2% above inflation (CPI).
- The contributions are payments usually made by the employer into a pension scheme to fund retirement benefits.
- The rate is linked to GDP and public finances, and the increase means the assumed rate of return/growth used to value future pension liabilities has gone up. An increase usually signals an assumption of stronger long-term growth, or a policy decision to ease pension cost pressures.
- A higher discount rate means that the present value of past and future pension promises to public sector pension workers is lower than previously estimated.
- As a result, employer contributions rate to pension scheme will likely fall.
What does this mean in practice?
Although this change is quite technical, the key points for you are:
- Pension values are likely to reduce on paper
The way public sector pensions are valued has changed, meaning the Cash Equivalent Transfer Value (CETV) may now be lower than before. - Your actual pension is not reduced
Importantly, this does not affect what you will receive in retirement. It only affects how the pension is valued for divorce purposes.
Why this matters in divorce cases
Public sector pensions can be one of the most valuable assets in a financial settlement. This change can therefore affect how finances are divided.
What impact could this have on your case?
Depending on your situation, you may experience:
1. Delays
- Many pension schemes are updating their calculations.
- This means delays in issuing CETV figures, which are generally needed to move your case forward.
2. Changes to previously obtained figures
- If pension values have already been obtained, they may now be out of date.
- This could affect negotiations or any expert reports already prepared.
3. Impact on pension sharing
- If a pension sharing order has been agreed but not yet implemented, there may be:
- Delays in implementing the pension share
- Changes in the final pension share due to a different CETV
4. Possible repayment issues
- In some cases where pensions are already in payment, delays could lead to more overpayments.
- These may need to be repaid, so it is sensible to set aside funds if this applies to you.
What should you do?
- Stay in touch with your lawyer about whether updated pension figures are needed.
- Be aware that timelines may be longer than expected.
- If expert advice has already been obtained, we may need to check whether updates are required.
- If your case involves a pension in payment, consider keeping some funds aside in case adjustments are needed.
Key takeaway
This change mainly affects how pensions are valued—not the pension itself—but it can influence how financial settlements are calculated and may cause delays.