Expert Pension Loss / Loss of Earnings Reports

Are you asked to justify why a pension expert is required?  It seems defendants, and the Courts, are often reluctant to accept the need for a pension expert, on defined benefit pension schemes in particular.  These are the schemes where the pension and lump sum depend on years’ membership and salaries, rather than the value of the pension fund at retirement.

The argument is that defined benefit pension schemes (these days primarily in the public sector – teachers, local government, NHS, civil service, police) are straightforward and so any calculation of lost pension is simple.  In our opinion defined benefit pension schemes are often not straightforward at all, which of course makes any calculation for loss of pension more complicated.

In the last ten to fifteen years all of the public sector pension schemes have made changes to how the pensions and lump sums they provide are calculated.  What this means is that almost all schemes have three different sections, sometimes more.  You need to know the rules for each section to be able to calculate a loss of pension accurately.

A claimant will often have membership in two or possibly three sections of their pension scheme.  Each section will calculate the final pension received by the member differently.  There will often be a different retirement age for each section, with the current section usually using the member’s state retirement age.

The current section of a public sector pension scheme is usually a care average revalued earnings (CARE) scheme.  This calculates the pension based on a member’s pensionable earnings each year, with annual revaluations of the total pension earned to date.  The revaluations may be for inflation only, or a set percentage plus inflation.  If the latter the set percentage has to be applied to the calculations of projected and actual pensions in the future as well.

The different sections of the pension schemes have early and late retirement factors that apply depending on when the member’s retirement might be.  There is also the question of whether or not a lump sum would be taken, as for most sections of a pension scheme this will reduce the annual pension.

If all or any of this sounds straightforward there may be additional complicating factors to take into account.  The claimant may have a reduced life expectancy – what impact does that have on their pension ?  The claimant may be a high earner (admittedly only a small proportion of the total membership) and the cap on annual contributions and the lifetime allowance may have to be taken into account.

WE can help…

…with straightforward reports and accurate calculations of the lost pension from defined benefit pension schemes.  We are happy to discuss cases generally to see how we may best assist you and have many years’ experience in this specialist field.  Please contact our Chartered Accountant, Mark Pillar here

Or visit our dedicated Nestor web page here