IFoA Working Party for Pensions on Divorce: Template Executive Summary

Readers of the FRJ need hardly be told about the importance of proper consideration being given to pensions on divorce. The family law profession already has the excellent guidance issued by the Pensions Advisory Group in PAG and PAG2, and benefits from the wisdom and expertise of a number of specialist Pensions on Divorce Experts (PODEs) where expert reports are required.

PAG and PAG2 did much to standardise some elements of working with PODEs, in particular the production of a template letter of instruction. Alongside such work, the Institute and Faculty of Actuaries (IFoA) carried out a thematic review looking specifically at the quality of expert reports produced by actuary PODEs and the way in which such PODEs carry out their work. Reporting in 2024, the IFoA’s report (Pensions on divorce: expert actuarial advice) concluded (amongst other key findings):

• The overall standard of advice was good with sound levels of compliance with standards. There were, however, examples where advice could be improved, to help couples understand the implications more clearly (Finding 12).
• The absence of defined methodology and specific technical standards meant there were a range of justifiable approaches adopted by actuaries, leading to inconsistencies between reports and contributing to the need for complex and lengthy explanations of preferred approaches (Finding 9).
• Actuaries used different terminology to describe the same methodology (Finding 10).
• There were mixed views among lawyers on the complexity of reports, although the majority believed there should be more standardisation and this view has strengthened over the last five years. (Finding 11).
• Actuaries and lawyers reported that collection of data from pension schemes and providers was a major issue (Findings 16 and 17).

Following on from the Thematic Review, the IFoA established a new Working Party dealing with Pensions on Divorce (Help to Shape How Pensions on Divorce Reports Are Prepared). The remit of the Working Party was to address some of the points highlighted by the Thematic Review, in particular:

• standardisation and simplification of reporting;
• whether standardisation or defaults for technical methodology would be appropriate, and, if so, what any defaults should be;
• use of consistent terminology by actuary PODEs;
• whether it was possible to streamline data collection.

This blog post launches the working party’s output in relation to that first objective.

The Template Executive Summary

Attached to this blog is a pdf containing the Working Party’s:

• Template Executive Summary for inclusion by PODEs at the commencement of their report;
• Example Completed Executive Summary; and
• detailed ‘User Guide’ to assist PODEs.

We also provide the Template in editable Word format for easy use by PODEs.

It is by no means suggested that use of the Template by actuary PODEs (or indeed non-actuary PODEs) be mandated, but it is hoped that the adoption of a template, which will, over time, become familiar to professional readers / end users, will assist time-poor judges, and busy lawyers no end. Furthermore, it is hoped that the clear, structured layout of the template summary will help litigants themselves (particularly those navigating the family law courts without the benefit of professional legal and/or financial advice) to better understand the key features of the pensions they hold, the results and recommendations of the report, the impact for each of them of the proposed pension share (or shares), and to direct them to the relevant sections of the fuller report for further explanation or information. It is anticipated that, in practice, the Template will be adapted by PODEs as and when cases demand, and to fit their own ‘house-style’, but it is hoped that the overall structure will be kept substantively the same to assist users.

The Working Party did consider whether a template full report could be prepared but considered the executive summary both the obvious starting point and the area in which most impact could be had. Ultimately, each PODE will likely have their own house style, and each report will be bespoke to the couple in question. Therefore, devotion of time to the development of a template full report was agreed to be neither proportionate nor necessary at this stage.

A word on our methodology

A full report will follow but so far as the preparation of the Template Executive Summary is concerned, the Working Party’s methodology can be summarised as follows:

• Anonymised example reports were received from six organisations / actuary PODEs for review as to how they differed in structure and approach.
• A sub-group (consisting of all three family lawyers in the Working Party, the Working Party Chair (Ian Sharpe) and one of the PODEs) identified both the fact that a Template Executive Summary would be of assistance and what it would be helpful to include.
• A draft template was prepared alongside the draft ‘user guide’ and, after input from the wider Working Party, those papers were sent out to a consultation group consisting of family lawyers, other actuary PODEs, and IFAs who both overwhelmingly endorsed the production of a template Executive Summary, and provided helpful comments which were then fed into the documents.
• An example, hypothetical template was completed by a PODE member of the working party and drafting points arising out of that were addressed, before the papers were finalised and reviewed by the IFoA ready for publication.

Future plans

We have had commitments from some of the largest PODE firms to begin including the Template in their reports by the New Year. We very much hope that widespread adoption will become the norm.

Within the Working Party, we have tested the Template against example cases and received positive feedback from our consultation group. However, we recognise that, once the Template is in use for a broader variety of cases, we will see a much broader range of views and examples. As such, we propose reviewing the Template in light of this experience in around a year’s time.

We anticipate publishing our findings on the other themes in scope of the Working Party shortly and will be presenting at an IFoA Sessional meeting on October 20. Attendance is open to all and details can be found at Sessional meeting: Pensions on Divorce Working Party.

Working Party Members

Ian Sharpe (Chair), Frances Bailey (Co-Chair), Elizabeth Bowden, Lindsay Davies, Richard Nobbs, Rahim Rashid, Aaron Segal, Evangeline So and Paul Windle.

Former Working Party Members: Suzanne Dossell and Anvita Jain.

Members of the Consultation Group

Paul Cobley, Michael Finnegan, Michael George, Sarah Hoskinson, Stephen Hyams, Richard Rigg, Rhys Taylor, Julian Whight, Clare Williams.

Organisations who submitted anonymised reports

Actuaries for Lawyers, Excalibur Actuaries, Expert Pension Solutions Ltd, Mathieson Consulting, Nigel Sloam & Co and WBR Group.