| Age at divorce | 35 |
| Pensionable service at divorce | 10 years |
| Normal retirement age | 60 |
| Actual plus potential pensionable service | 35 years |
| Rate of employee contributions: | 5 per cent |
| Benefit accrual rate | 1/60 |
| Share awarded to former spouse on divorce | 40 per cent |
The rights forgone broadly equate to four years'
service and, as the member would have only accrued a pension of
35/60, could be replaced by increasing contributions to the scheme.
Annual additional contributions to purchase four additional years
at age 40 are about 2.4 per cent of earnings: within employee
contribution limit of 15 per cent.
Member and former spouse's combined pension
remains within overall benefit limit of final salary.
Member also has scope to purchase one further
additional year if he so wishes.
EXAMPLE 2
Occupational Pension Scheme
This example is for illustrative purposes only.
For simplicity earnings are assumed to be flat rate, contributions
grow at 5 per cent per annum, the pension is flat rate and £1
of pension costs £12.
| Age at divorce | 45 |
| Pensionable service at divorce | 15 years |
| Normal retirement age | 60 |
| Actual plus potential pensionable service | 30 years |
| Rate of employee contributions: | 5 per cent |
| Benefit accrual rate | 1/60 per annum |
| Share awarded to former spouse on divorce | 40 per cent |
The rights forgone broadly equate to six years'
service and, as the member would have only accrued a pension of
30/60, could be rebuilt by increasing contributions to the scheme.
Additional annual contributions to purchase six additional years
at age 45 are about 6 per cent of earnings: remains within employee
contribution limit of 15 per cent. Member and former spouse's
combined pension remains within overall benefit limit of final
salary.
Member also has scope to purchase a further
four additional years if he so wishes.
EXAMPLE 3
Occupational Pension Scheme
This example is for illustrative purposes only.
For simplicity earnings are assumed to be flat rate, contributions
grow at 5 per cent per annum, the pension is flat rate and £1
of pension costs £12.
| Age at divorce | 58 |
| Pensionable service at divorce | 38 years |
| Normal retirement age | 60 |
| Actual plus potential pensionable service | 40 years |
| Rate of employee contributions | 5 per cent |
| Benefit accrual rate | 1/60 per annum |
| Share awarded to former spouse on divorce | 40 per cent |
The rights forgone equate broadly to 15.2 years'
service.
Member left with 22.8 years' contributions.
Member cannot rebuild pension rights: can only
make two extra years contributions—to give a total pension
of 24.8/60 of final salary—because former spouse share of
15.2/60 counts against benefit limit of final salary.
EXAMPLE 4
Personal Pension Scheme
This example is for illustrative purposes only.
Assumes 2 per cent initial charge and 1 per cent annual fee.
| Age when contract taken out | 20 |
| Age at divorce | 40 |
| Average earnings | £22,000 |
| Contributions | 5 per cent |
| Expected total unshared fund at 40 years | £105,000 |
| Actual fund at 20 years | £32,000 |
| Share awarded to former spouse on divorce | 40 per cent |
Retirement fund at age 60 could be rebuilt to
£105,000 by increasing contributions to about 9 per cent.
Member can rebuild pension fund by increasing
contributions from 5 per cent to 9 per cent: remains within contribution
limit of 20 per cent at age 40 (limit then increases with age).
EXAMPLE 5
Personal Pension Scheme
This example is for illustrative purposes only.
Assumes 2 per cent initial charge and 1 per cent annual fee.
| Age when contract taken out | 20 |
| Age at divorce | 40 |
| Average earnings | £22,000 |
| Contributions | 10 per cent |
| Expected total unshared fund at 40 years | £210,000 |
| Actual fund at 20 years | £66,000 |
| Share awarded to former spouse on divorce | 40 per cent |
Retirement fund at age 60 could be rebuilt to
£210,000 by increasing contributions to about 18.8 per cent.
Member can rebuild pension rights by increasing
contributions from 10 per cent to 18.8 per cent: remains within
the contribution limit of 20 per cent at age 40 (limit then increases
with age).
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