Some two years have now passed since the First Edition of the Galbraith Tables were published. Much has happened within this intervening period. We, the authors, felt the need to produce a revised edition. This article discusses what has changed and why it has proved necessary for the new version to be produced, with the new full version of the Galbraith Tables being available at https://mcact.co.uk/galbraith-tables/. A simplified version of the Second Edition is shown alongside this article.

It is perhaps something of a cliché to note both that ‘permanence is the illusion of every age’ and that ‘nothing dates faster than a vision of the future’. Alas this is very much the case when it comes to placing a value upon future unknown cashflows such as pensions.

The Galbraith Tables seek to provide the family law practitioner with a means by which an approximate value may be placed upon future pension rights, some of which may be in payment some 30+ years hence, and it follows that the thinking on such matters will change over time. But how often should one seek to update such tables?

We were very much of the opinion that producing a new set of Galbraith Tables every month or every quarter would suit no one: there would be endless competing sets of tables in existence and it might prove just a little time-consuming for us!

However, since the publication of the First Edition, we have seen an inflationary spike that has led to tighter monetary policy being adopted by the Bank of England: in short, interest rates are higher now than the c. 2008–2021 status quo ante. Most economists suggest that it is unlikely that we shall see the return of near-zero interest rates – upon which the First Edition relied – in the foreseeable future and, in turn, we took the view that the time had come to increase the ‘discount rate’ used in our model.

This means that the Second Edition of the Galbraith Tables seeks to place a lower value on future pension rights than did the First Edition. Such a change is in keeping with the reductions that have been seen in the Cash Equivalents of private sector defined benefit pensions since early 2022: the use of higher discount rates means that less monies need now be set aside today to cover the cost of meeting future benefit obligations. (The Second Edition also reflects updates in life expectancies, with post-COVID-19 pandemic data now being available, but such changes make little difference to the overall results.)

This reduction in defined benefit pension Cash Equivalents can be observed from, for example, the ‘Transfer Value Tracker’ produced by actuarial consultancy XPS (www.xpsgroup.com/what-we-do/technology-and-trackers/xps-transfer-watch/xps-transfer-value-tracker/). The chart as at March 2024 shows that Cash Equivalents reduced considerably over 2022 and have remained at a level much lower than was previously the case.

To give an example of how the Galbraith Tables have changed, the First Edition valued a £10,000 per annum pension, payable at age 60 to a man now aged 45, at c. £262k, while the Second Edition tables value the same benefit at just c. £143k. The reduction is both a function of higher expected investment returns assumed over: (1) the 15-year period to age 60; and (2) the period in which the income is in payment.

With regard to this latter point, the Galbraith Tables use an income drawdown model, rather than explicitly seeking to model annuity purchase, but this change is commensurate with the improvements in annuity rates that have been observed in the last c. 18 months, i.e. a £100k notional fund goes further than it used to in providing a fixed income in retirement.

As regards the ‘longevity’ of this Second Edition of the Galbraith Tables, it is to be hoped that the market realignment of late 2022 might be regarded as some form of paradigm shift, rather than being but temporary noise that then gives rise to something else. Such is the challenge in seeking to produce such fixed tables: it is impossible to predict whether they will remain in kilter with the real world for which they are intended to serve as an approximation.

Since the publication of the First Edition, the Galbraith Tables have been featured here in the Financial Remedies Journal, appeared in At A Glance 2023–24, and have also been acknowledged, with a cautious welcome as a useful starting point, within the revised edition of A Guide to the Treatment of Pensions on Divorce, known as the PAG2 guide. We are grateful for the recognition that the tables have received. We hope that this updated edition will continue to prove useful to family law practitioners in the future.

The Second Edition of the Galbraith Tables

Lump sum valuation factors

To be used to value a £1 lump sum (expressed in today's money terms) that is payable at the assumed retirement age

A factor of 1.000 is assumed for all lump sums that are to be taken immediately.

Pension valuation factors: male

To be used to value an index-linked £1 p.a. pension (expressed in today's money terms) that is payable to a male from the assumed retirement age

Pension valuation factors: female

To be used to value an index-linked £1 p.a. pension (expressed in today's money terms) that is payable to a female from the assumed retirement age