It is no longer just the obvious material assets that have to be divided up by divorcing partners, says Gwenda Joyce-Brophy. Often the pension has more value than the joint property equity
Divorce may be becoming more commonplace, but the financial issues and conundrums it throws up in its wake are, if anything, becoming increasingly complex. A combination of factors are at work. The average age at divorce for both men and women is now mid to late thirties, precisely a stage in life when many couples have accrued assets of varying value and liquidity - as well as liabilities and responsibilities. Superimposed on this demographic fact are the far-reaching implications of changes to the law relating to the role of pensions as an asset in divorce.

The Pensions Act of 1995 represented a sea-change, and pension funds now have to be considered in a divorce. While "who gets the house" was once the overriding issue, "what happens to the pension?" is now equally pertinent. Indeed, if there is little equity in the matrimonial property, the pension may be the most valuable asset.

Currently courts can earmark - set aside - a share of a spouse's pension. Because of vexed issues such as the pension holder dying before retirement age and the question of remarriage, judges often prefer to compensate using other assets to offset loss of pension rights. Pension splitting, a cause which the group Fairshares in particular has relentlessly championed, is where the allocated pension share remains in the scheme, and April 2000 seems to be the likely date for this to take effect.

Meanwhile, those embarking on divorce are already finding that issues such as the valuation of pensions can be a quagmire in which even their solicitors can find themselves floundering. Yet as Fairshares' Dawn Barnett notes: "The decisions you will make during your divorce are absolutely crucial for your future. That is why it is vital to get advice, and to make sure that pensions, for example, are valued properly."

It is no surprise then that many of those involved in divorce, both personally as well as professionally, have been increasingly looking for sources of specialised financial help. "We have seen the volume of demand for this sort of service growing steadily over the past few years, particularly among women, and it is the area of pensions that has seen increasing demand for our specialist advice, from solicitors also," says Mark Ormerod of Hill Martin Financial Management Group. Keith Brown, an independent consultant at NJS Services in Kent, has also noted additional enquiries from solicitors.

Regulations in 1996 laid down that the value of a pension be the "cash equivalent transfer value" (what the holder would be paid if he were to transfer it to another pension fund). This can undershoot its real value, many experts believe, and pension valuation remains a difficult issue.

One group, The Divorce Corporation, specialises solely in pension valuation. "It is a very complex area. All pension valuations involve making a number of assumptions, and, depending on those assumptions you can come out with very different results," says the corporation's Keith Popplewell. In one instance, using different assumptions, valuations of pounds 20,000 and pounds 110,000 were obtained for the same pension.

"The CETV approach can underestimate the value of a pension for a variety of reasons, and you have to make sure that death in service and loss of widow's pension are taken into account."

NJS's Keith Brown says: "I think people are still unaware of the implication of the Pensions Act when it comes to divorce despite the prolonged political arguments surrounding it. In particular they seem unaware of the implications it may have on their own retirement funds and how much it would cost to replace those funds.

"We also see a lot of confusion about earmarking and splitting and I am not sure that a solicitor alone should be advising on this area. It is times like these that it would be sensible to see advisers and solicitors working together in the client's interests". The Divorce Corporation in fact only works on instruction from solicitors.

You can't expect solicitors to do the impossible - pension valuation is becoming a profession in itself, says Mr Popplewell, a view reinforced by family solicitor Jane Simpson of solicitors Manches and Co who sometimes uses the services of financial groups. "Expert pension advice will become even more important because of the flexibility that the Family Law Act will provide when it is implemented in late 1999 or 2000.

With all the emphasis on pensions it is easy to give other assets scant attention, or to see pensions as an issue in isolation when it is one part of a financial profile that needs to be considered whole. "We work together with the solicitor to ensure the client is made aware of the potential pitfalls regarding the various assets in order to navigate the most suitable course", says Keith Brown. "For example, if there is an endowment mortgage, should it be assigned to one partner only, or surrendered or sold? In addition, when we do review the policies in place there is often a wish from the client to stop all plans including savings plans and life cover originally intended to be of benefit to children. There is sometimes little discussion as to who will take financial responsibility for these plans, and as a result, neither partner does. This can lead to perfectly good plans being surrendered when with some discussion this could be avoided".

Strategic planning is something that Mr Ormerod of Hill Martin believes is one of their key roles. "For example, we will advise on investment strategies that deal with income requirements for the future."

While the solicitor's role is in negotiating a settlement, that settlement needs to be used in the most efficient way. "Some people for whom we act often have little experience of financial management or investment. If we achieve for them a clean break which includes a lump sum payment for investment to provide income, then that has to be managed carefully," says Jane Simpson.

Obtaining extra, specialised advice costs money. Rates will vary, with some services offering one-off fixed fees for specific services as in the case of the Divorce Corporation, while others are charged by the hour. Mr Ormerod at Hill Martin believes it is vital that the client receives independent advice on a fee basis. "Clients are vulnerable to being sold products," he says. "What people sometimes forget is that we can and do actually save clients money," argues Keith Brown. "We look to the financial group to do the things a solicitor does not and cannot do, for example give investment advice, or things it can do more cost-effectively, for example preparing a financial budget," says Jane Simpson.

In term of choosing one: "Ask your solicitor if he or she has direct experience, particularly of the financial adviser's results," advises Jane Simpson. "In addition to results, we also look for where an adviser and his or her team deal with the client sensitively and patiently, as well as for flexibility and dependability".

The Divorce Corporation: 0114 262 0616 (pension valuations for solicitors). Fairshares: 01788 570585. Hill Martin Financial Management Group: 0171 233 2777 (London Office), 0117 927 1500 (Bristol Office). NJS Consultants: 01689 850445. Manches and Co: 0171 404 4433.

The Which Guide to Divorce has chapters on Financial Planning for Divorce and Pensions. pounds 10.99 p&p free, call 0800 252100.