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Pensions and Divorce – Helping You Navigate a Difficult Time

Earlier this month, solicitors across the country braced themselves for ‘Divorce Day’ – the time of year that lawyers expect a higher than average number of enquiries from couples considering divorce. The financial stress of the holidays tends to strain many relationships so when people are back to reality and the working world, all that stress can get on top of you.

This does not constitute advice and advice should be sought in all instances before acting on it.

Divorce is a stressful time. It’s easy to overlook parts of your finances during a settlement. However, imagine how much more stressful your financial situation could be without solid pension savings if you overlook this in divorce proceedings.

A divorce is never an easy option; just the task of dividing assets might be enough to prompt a reconciliation. Often pension savings aren’t a priority – with focus being on property, custody of children, and personal assets. However, in terms of value, this pot can often be one of your biggest assets.

Women adversely impacted

According to the Office for National Statistics, Women appear to be disproportionately affected because nearly half surveyed don’t take pensions into consideration when agreeing on a settlement.

Even though over half of married couples go toe to toe regarding property and over a third would want savings split evenly, less than 10% want to divide pensions. Even if pension savings are discussed, some women lose access to any pension savings or are left relying only on the State Pension after they divorce.

Account for your pension assets

It’s important to think about pension assets, especially if your pension is already being paid out and you’re accruing benefits. Apart from the State Pension, all pension funds are up for grabs and can also be used for bargaining during discussions. You’ll need to come to the table ready to disclose all your assets and their true value.

Ways to divide

There are options for handling pensions during proceedings so be sure to be informed and choose the option right for you.

  • Pension sharing – Court-ordered dividing of pension assets (Note: disbursement options don’t change, you won’t receive a lump sum unless you’re already over retirement age.)
  • Pension offsetting – Leveraging the value of the pension fund against other assets. Tread lightly with this option because it’s tough to measure apples and oranges when comparing assets. There are pros and cons to dividing assets this way and if you go this route, you’ll need to decide how you’ll make up the difference financially without other assets.
  • Pension earmarking – Opting to take a lump sum from the other person’s pension when they start to withdraw from it. This could backfire if the pension holder delays retirement leaving the lump sum recipient at their mercy. Remarriage and ex-partner death will put a stop to any payments
  • Deferred lump sum – Receiving lump sum upon pension holder’s retirement (Not available in Scotland)
  • Deferred pension sharing – Lets you receive an unreduced pension until your ex-partner reaches retirement age, too. If you’re both retired, you can still divide pensions but you’ll be unable to receive a tax-free lump sum. (Not available in Scotland)

An expert can help you manage your finances

While we can’t take care of all the legal matters during a divorce, we can offer tailored financial advice to suit your change in circumstances following this major life event. Don’t hesitate to reach out to schedule time with your adviser today.: 01403 780 770

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