Changes to the calculation of CETVs

HM Treasury has announced changes to the calculation of cash equivalent transfer value (CETV) for those employed within the public sector, as of 30 March 2023.

CETVs form a key part of the settlement agreement between divorcing couples and those seeking dissolution of their civil partnership, where at least one of the parties is employed within the public sector.

The public sector makes up nearly 18% of the UK workforce, with these new provisions currently concerning individuals working within the NHS or as teachers – this will also be extended to include police officers, firefighters and armed forces personnel in due course.

Guidance for these new changes was published on 27th April 2023, by which point delays had already ensued, leaving both solicitors and their clients in unprecedented difficulties.

We look at some of the key implications here:

What is a CETV?

In order to reach a legally binding agreement concerning assets, both parties involved in the divorce/dissolution must provide details of any property, savings and pensions to ensure transparency and allow a fair settlement.

For those who possess a public sector pension, the only way to determine its value is to request a cash equivalent transfer value (CETV). This provides the current value of the pension which is relevant in determining the outcome of your divorce. The principal aim is to ensure that neither party is disadvantaged, by striving to achieve an equitable distribution.

How has it changed?

Typically, CETVs can fluctuate based on factors such as interest rates, changes in the stock market and inflation. It is therefore difficult to predict whether the value will increase or decline at any given moment.

These new changes announced by the Treasury have amended the method of calculation of CETVs, the intention of this being to increase the apparent value of the pension, although again, this is relative to several factors and is not guaranteed.

How might this affect you?

This announcement meant that the calculation of CETVs had to be suspended to allow time for guidance. Although now restored, this has unfortunately led to significant delays as couples affected were unable to progress with their divorces without this crucial information about the assets of their marriage.

These delays mean that couples must wait longer before they finalise any financial arrangements, and before they can be certain of their assets upon separation, in order to leave with a ‘clean break’.  This of course has had the potential to add unnecessary stress for those involved.

Do you still need a solicitor?

You should always seek legal advice and support when considering divorce or dissolution. Reaching an agreement following a relationship breakdown can be an emotive and time demanding process, so it is important to ensure that you receive the correct advice and guidance, and any necessary support.

If you would like to discuss your personal situation and how these changes could affect you, please do get in touch with our expert and friendly Family Law team here at Fosters Solicitors on 01603 620508 or by email.

For more information about the full range of services our Family Law team can provide, please visit our service pages.