posted 11th August 2023
CETV Explainer: Why It Matters in Divorce
CETV stands for Cash Equivalent Transfer Value. It is the figure a pension scheme puts on what a member's benefits are worth if they were transferred to another scheme.
In a divorce it is the number everything else depends on. Until both parties have it, nobody knows what the pensions are worth, so nobody can work out what a fair settlement looks like.
Why it is needed
Pensions are often the second most valuable asset a couple has, and sometimes the most valuable. They cannot be divided sensibly without a figure attached, and the CETV is that figure.
Both parties usually need one for each pension held.
How pensions get divided
- *Offsetting* — the value of the pension is set against other assets, so one party keeps the pension while the other takes more of the house or savings
- *Pension sharing* — a percentage is transferred to the other party, creating a separate pension in their own name
- *Earmarking* — a share of the benefits is paid across when the member starts drawing the pension
Pension sharing is the most common where the values are significant, because it gives both parties a clean separation rather than an ongoing link.
The delay nobody warns you about
This is the part that catches people out.
Providers of defined benefit schemes have three months by law to produce a CETV. In practice it is commonly four to twelve weeks and sometimes considerably longer. Public sector schemes are usually the slowest.
It is the single most frequent cause of delay in a financial settlement, and it is entirely outside your control and ours.
The practical answer is to request the valuations at the very start, before anything else is discussed, rather than reaching agreement on everything else and then waiting.
Where specialist advice helps
Most cases do not need a financial adviser. Where the scheme is unusual, where there is a significant age gap between the parties or where a defined benefit scheme is being compared against a defined contribution one, an actuarial report may be worth the cost.
We will say when we think that applies rather than routinely.
The CETV is where a pension settlement starts. Get in touch for a free initial consultation, and we will tell you what to request and from whom.
