Why do I need a Full PODE report?
A Full PODE report is needed to deal with sharing pensions on divorce when there is at least one complex pension such as a defined benefit pension. These are complex pensions and figuring out how to share them on divorce is a big job requiring expert analysis and specialised tools.
Whats the significance of having a defined benefit pension?
Defined benefit pensions are a promise of a future income - a set amount paid for the rest of your life, usually rising in line with inflation. That income might not start for many years, but it's based on your salary and years of service, not how the investments perform.
This sounds simple, but working out what that income is really worth - especially in divorce - can be far from straightforward.
For example, if a pension is due to pay £20,000 a year from age 65, and it’s split 50/50, it might seem fair that each person gets £10,000 a year. But if one person turns 65 first and/or lives longer than the other, that 50/50 income split could result in them receiving significantly more over time. Age, sex, and life expectancy all affect how valuable the income is to each person.
That’s why pensions can’t just be divided based on face value. A specialist (PODE) can carry out calculations to help the court or the couple understand what a fair division might look like - under different approaches - but it’s up to you (or the court) to decide which path to take.
So why is this relevant to sharing pensions on divorce?
Sharing pensions on divorce means re-allocating some of the available pot from one member to their former spouse, who may be older or younger, but will certainly have a different life expectancy. So the amount of the pot needed for the spouse will be different.
Often this means that the scheme will not accept the spouse as a member, preferring instead to give a lump sum to them so they don't have to add them to the scheme. But they still need to know how much the lump sum should be.
Here's the crux - the PODE report will work through these complexities for you
They will tell you:
which pension(s) to share and
how much needs to be shared in order to be fair to both of you
The Bottom Line
Defined Benefit pensions are complex and if you don’t use a Pension Expert to work out the pension share, one of you will almost certainly be worse off.