Matrimonial matter - Divorce - financial settlement approved by court 8/12/2014 by way of Consent Order and Pension Sharing Order / Annexe. Q (1) My question relates to the Pension Sharing Order. I am > 55 years old and as per financial settlement approved, I made a cash payment £100k to my wife (funded from the 25% tax free element (broadly £200k) of my SIPP (broadly CETV £800k) in addition to a 12.7% share of my SIPP (originally designed to be equivalent to £100k) to a scheme in my ex wife's name. I was not made aware and neither was my ex wife, that having withdrawn £100k from the Sipp to make £100k payment, by the time the request is made upon my pension trustees, the CETV will be lower by £100k ie CETV c £700k. This will postulate a pension transfer of less than £100k. All sides and all professional advisors were aware that the cash payment was to be effected from my tax free sum in my Sipp. Clearly, i shall benefit.
Should me and my wife have been advised by our respective solicitors please?
Q.(2) Having crystallised £400k of my Sipp by the above £100k cash tax free withdrawal, subsequent to the court approval of the consent / pension sharing orders, i understand my ex wife will benefit from a tax free cash lump when she is aged 55 from her pension share when transferred. Should my solicitor have considered this aspect and advised me and sought my instructions as to whether the pension transfer should be effected from the crystallised or uncrystallised Sipp funds and which should then have been specified in the consent order / pension sharing order to legally cover this aspect. My desire would have been to transfer the 12.7% from my Sipp's crystallised pot of funds NOT from my uncrystallised pot as appears now to be the case. ie i would have wanted to retain all the remaining uncrystallised funds to benefit from all the remaining tax free cash having already crystallised £400k of my sipp to pay my wife the initial £100k cash payment. Would you advise me whether you think i have recourse to my solicitors for lack of advice and a claim against their PI cover I look forward to hearing from you. Thank you. Ian
No. Pension actuaries were not involved.
Some misunderstanding here; I was / am very well aware that my ex wife shall be entitled to a tax free cash lump sum when she is aged 55 (currently aged 44).
The point i am making is how should this aspect have been covered off ie what advice should i have been given by my Solicitor. Should my solicitor have raised this aspect with me prior to submission of the papers to the Court and advised me how and where this aspect should have been documented?
The only focus was on the 12.7% stated in the Pension Sharing Order and in the furor of the pressing timescales / pressure on getting the papers to Court to meet the deadline linked to the exchange of contracts on the sale of the matrimonial home (purchasers were going to withdraw) i had not considered the aspect of how / where / when this aspect should be covered off. I still don't know ie should it have been included somewhere in the Pension Sharing Order? Can you advise me please? I consider the onus was on my solicitor to safeguard my interests by giving consideration to this matter as an experienced divorce lawyer and advise me accordingly. Do you agree please?
As it now stands, as i understand it, in round figures the remaining Sipp is made up of £300k uncrystallised and £400k crystallised (ie Sipp CETV £700k after £100k cash withdrawn) and so when ex wife (or the Court?) claims pension transfer £100k from Trustees of my Sipp, she will be entitled to a proportional share of the remaining tax free element as a cash lump sum against her £100k pension ie 3/7ths of 25%.
Yes, firstly your understanding above is correct.
My query revolves around the % tax free cash she will be entitled to upon the transfer of the 12.7% from my Sipp fund.
Quite simply, i want the transfer to come out of the crystallised pot of funds in my scheme because this will not attract a tax free cash element for her (not forgetting i have already crystallised £400k of my fund by drawing £100k cash to pay her in the first place!).
So, i understand i could have specified that instruction as part of the divorce financial settlement through the Court . As it wasn't specified i understand my ex wife will now receive, upon transfer of the £100k from my fund, a proportion of that £100k by way of 50% from my crystallised fund and 50% uncrystallised fund - i did not want that as i wished to preserve all the remaining uncrystallised pot which would attract a 25% tax free cash element.
As it stands, i understand my ex wife will have a proportional share of the remaining available tax free cash from the uncrystallised pot which i calculate at:-
£300k uncrystallised pot Vs £400k uncrystallised pot = total fund £700k (after £100k tax free cash withdrawn) ie 43% uncrystallised and 57% crystallised.
That proportion translates into 43% of 25% = c11% of £100k which equals £11k tax free cash available to my ex wife.
My belief is that i should have been advised of this scenario by my solicitor to give me the opportunity to set out and request the Court, in the Pension Sharing Order, to approve the transfer of the pension fund £100k to my ex wife should be made out of the crystallised fund.
I look forward to hearing from you.
Thank you for your response.
Finally, my Solicitor actually calculated and inserted the 12.7% in the original Pension Sharing Order / Annexe which accompanied the Charging Order.
The Charging Order was signed by me as the Respondent (signed in good faith as i had no idea of the potential implication on the potential dilution of my ex's pension fund transfer in the circumstances i have set out) and of course signed by my Solicitor.
The Charging Order was also signed by my ex (the Applicant) and her Solicitor. Both the Charging Order and Pension Sharing Order were sent from my Solicitor to my ex's Solicitor for overview / approval and as my ex's Solicitor was responsible for controlling the submission of the papers to the Court.
As part of the Court's consideration of the Orders, the Judge actually telephoned my ex's Solicitor to enquire of the source of the £100k cash payment i was making to my ex and my ex's solicitor explained it was being sourced from my Sipp via a tax free cash lump sum.
In summary, all parties, including the Judge / Court, were aware of the source of the cash lump sum paid to my ex.
It appears both the Applicant and Respondent under the advice and guidance of their respective solicitors, signed the Charging Order (accompanied by the Pension Sharing Order which did not require signatures) and was submitted to the Court and approved by the Court.
I appreciate you do not have the benefit of sight of the documents, however, there was no other specific reference to the pension amount in £'s in the Charging Order (as you will be aware this is specifically set out in the Pension Sharing Order as a %).
In conclusion and in the knowledge of the above background, my final question relates to where my ex has recourse for a potential claim. You have already stated she may have a potential claim against her solicitor.
Would you please advise if you consider:-
On both counts I would think not as the legal process has been followed / completed and approved by the Court.
Thank you for your views / consultancy advices Clare which are appreciated.
your first paragraph of email 22/3/15 17:28 conflicts with the trustees of my Sipp who say that subject to the mutual agreement of both parties Applicant and Respondent, they would act on an instruction to implement the pension transfer from the existing crystallised fund.
Does it not follow therefore that such an instruction could have been included in the Consent Order / Pension Sharing Order?
Sorry about this but i would appreciate your further thoughts.