Pensions and Divorce:
As lockdown is in full-flow now, there is unprecedented strain on relationships. While we all hope things will never get that far, this situation has got us thinking: ‘What don’t people think about when they’re embroiled in a bitter dispute.’ For us, the resounding answer is their pensions
Aside from your family home, your pension will often be the biggest asset you have. As such, during a divorce, your pension will become a kind of bartering tool. It’s true that pension sharing is always an option, but it seems to be fairly unpopular. One of the main reasons for this is probably the complexity of pension legislation. They really don’t make it easy for divorce lawyers to keep abreast of the many difficulties involved. Yet that aside, during divorce, there are often pressures, both financial and emotional, at play. Naturally then, other assets are often accepted over pensions to avoid unnecessary fees and delays.
What does a Pension Share entail?
You would think the answer to this question would be straight forward. Sadly, the waters are muddied as, ironically, no one can quite agree on a universal method.
Thankfully, the Pensions Advisory Group recently published a guide on how pensions should be treated in divorce cases. So, if pensions are going to form a significant part of your divorce settlement, we’d urge you to ask your lawyer whether they’ve read this document. Better still, speak to a Resolution Accredited financial adviser, who will be able to easily navigate this for you.
What do I need to know about how my pension might impact any financial settlement?
You’re probably familiar with the concept of a pension pot – the money that will provide your income during your retirement. During a divorce, your pension needs factoring in too. So if, for example, you want a larger share in the family home in place of a share of the pension pot, you may find yourself considerably worse off over the long term.
There are situations where sharing your pension during your divorce, will actually be better for everyone. So, it really is important that you seek the expertise you require in ensuring the best possible outcome.
If your pension savings exceed the current lifetime allowance and you don’t have any protection in place, then sharing your pension pot could save you the heavy 55% tax charge you would otherwise incur? While you might begrudge not having so much in your pot, isn’t it better than someone (anyone?) has the 55% other than the taxman?
Questions to ask your lawyer
- Have you had any experience dealing with pensions on divorce?
- Have you read the Pension Advisory Group (PAG) report?
- How do you go about calculating the split of a pension to provide a particular income in retirement?
- Can you recommend a financial planner who can reality test my financial settlement to see if I can achieve what I want?
At Lewis Brownlee Financial Services, we can help guide you so that you can achieve a settlement that is right for all involved. And not only have we read the PAG report, but we also have a Resolution-accredited adviser on board!
So, if you would like to speak to our Resolution-accredited adviser, please do call us on 01243 767 469. Alternatively, you can email us from our contact page, and our adviser will be in touch!
Written by Alex Welsh
Alex is a Resolution-accredited, Chartered financial adviser. Having joined the firm in 2012, he has extensive knowledge of all areas of financial planning.