One of the most common issues expert financial witnesses encounter when reviewing pension loss calculations is the treatment of revaluation within defined benefit public sector pension schemes. This area is often misunderstood, yet can have a significant impact on the value of a claim.
In some cases, failing to account for scheme-specific pension revaluation can materially understate pension loss, particularly where the claimant is a member of a public sector pension scheme such as the NHS, Civil Service or Local Government Pension Scheme (LGPS).
For solicitors dealing with personal injury, clinical negligence or employment litigation cases, it is an issue that deserves careful consideration. In this article, Chartered Financial Planner Ian MacKendrick explains how to calculate pension revaluation, the evidence used and why such UK pension issues matter in litigation.
What Is a Revalued Annual Pension?
A revalued annual pension is a yearly retirement calculation within certain pension schemes that is adjusted upward over time to stay ahead of inflation. This adjustment, known as pension revaluation, ensures that the purchasing power of the money you earned increases while you wait to retire.
More specifically, revaluation is the process by which deferred pension benefits increase between the date they are earned and the date they are eventually paid. Most defined benefit public sector pension schemes apply annual increases to accrued pension rights.
Importantly, these increases are not always limited to inflation alone. Many schemes apply statutory or scheme-specific revaluation that may exceed assumptions already reflected elsewhere within a pension loss calculation.
When calculating pension loss in personal injury, clinical negligence or employment litigation cases, it is essential to understand precisely how each scheme operates.
Why Does This Matter in Litigation?
When calculating pension loss, we often use the Ogden Tables alongside actuarial assumptions. However, the Ogden multipliers already incorporate certain inflation assumptions. If scheme-specific pension revaluation is ignored or double-counted, the resulting calculation may be inaccurate.
Rather than ask whether the calculation has allowed for inflation, expert financial witnesses and solicitors should determine whether the correct pension revaluation methodology has been applied for the scheme in question. Every public sector pension in the UK has its own rules, and those rules can materially affect the valuation.
Differences in Public Sector Pension Schemes
Applying a standard assumption across every scheme can produce misleading results, since each has different benefit structures, retirement provisions and pension revaluation mechanisms. At Paladin Experts, we regularly deal with pension loss calculations involving:
Why Expert Evidence Matters When Calculating Revalued Pensions
Detail carries genuine weight when independent financial expert witnesses are analysing:
- The claimant’s public sector pension scheme
- The relevant scheme rules
- Accrued and projected benefits
- Revaluation methodology
- Retirement planning assumptions
- Salary progression
- The interaction with the Ogden methodology
Only once these elements have been considered together can an informed opinion be reached on UK public sector pension loss.
How to Recalculate Pension Revaluation
We frequently encounter common issues with calculations where, for example:
- Scheme-specific revaluation has been overlooked
- Inappropriate inflation assumptions have been applied
- Pension benefits have been valued using incorrect retirement planning assumptions
- Changes arising from the McCloud remedy have not been considered
- The interaction between revaluation and future earnings has not been fully reflected
However, it is possible to review existing pension loss calculations prepared during ongoing litigation. The existing calculation is often entirely appropriate, but we occasionally identify assumptions and issues, such as those above, that materially affect the pension valuation.
Paladin Experts regularly assist solicitors in refining the schedule of loss before settlement or trial. An early review can often provide reassurance that the calculations accurately reflect the claimant’s true financial position.
How Paladin Experts Can Help
As not every case requires a full expert report, we can, where appropriate, also assist on an agency basis by preparing or reviewing pension calculations to support solicitors and counsel during the litigation process. This can often be a cost-effective way of ensuring complex UK pension issues are addressed correctly before settlement discussions begin.
Paladin Experts specialise in financial expert witness evidence involving:
- Pension loss
- Public sector pension schemes
- Future loss of earnings
- Loss of dependency
- Lost years
- Periodical Payment Orders (PPOs)
Our reports are prepared for use in litigation and are designed to provide clear, evidence-based calculations that can be understood by solicitors, counsel and the Court. If you have a case involving a public sector pension, we are always happy to discuss whether pension revaluation, McCloud or other issues could affect the value of the claim. Please contact our team.
