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WHY PENSION AND ASSET ADVICE SHOULD BE PART OF THE DIVORCE PROCESS
by Sam Hulson of First Equitable
The emotional upheaval of divorce can be difficult to deal with , but so too can the financial implications . When relationships come to an end , there are so many things to consider . Children , home and support are naturally the first things you focus on .
When you begin the process of separating a shared life , the sheer number of things to deal with is daunting . On top of that , the settlement may come with its own financial pressures , having a lasting impact on your plans for later in life .
ONE OF THE MOST DIFFICULT ASSETS TO SPLIT Divorcing spouses are often unaware of their rights and still less aware of how to begin to approach the issue of a fair split of pension assets . A pension fund is likely to be one of the most difficult assets a couple will have to split in the event of a divorce , so it ’ s best to start early .
EARLY ADVICE IS CRUCIAL IN ANY SEPARATION Anyone going through a divorce should seek legal and professional financial advice to help them do so . For many more couples , the increase in the value of pensions means that it is often the largest asset . It goes without saying that this advice is crucial as early as possible in any separation where couples have joint assets .
HOW MUCH MONEY YOU THINK YOU ’ LL NEED TO LIVE ON LATER IN LIFE Before planning how to separate your pension assets , you may want to consider how much money you think you will need to live on later in life .
So what are the options available when you are ready to look at separating your assets ? Firstly , it ’ s important that you both list the different pensions you and your ex-civil partner or spouse have . Then you can start to explore the options .
Across the UK , there are three core options to consider when you ’ re separating pension assets . Some of these options need to be administered by the courts , and not all of them will be suited to your individual circumstances .
PENSION SHARING ORDER Pension sharing is one of the options available on divorce or the dissolution of a registered civil partnership . Each party owns a share of the pension fund but is able to decide what to do with their share independently . This provides a clean break between parties , as the pension assets are split .
PENSION ATTACHMENT ORDER This redirects some or all of the pension benefits to you or your excivil partner or spouse at the time of payment . When the person who owns the pension receives their benefits , the pension provider makes a payment to their ex-civil partner or spouse . With this option , you don ’ t get the clean break as you would from the pension sharing order and it could be problematic if you want to retire ( and therefore receive the pension benefit ) on a different date to your expartner ; as would typically be the case .
PENSION OFFSETTING With pension offsetting , the total assets are considered and then divided up . For example , if your ex-partner has a large pension pot , they may keep this as you may agree to receive an asset of similar value ( the house , for example ). This may also be an appropriate option if there are overseas pension assets that need to be split , as these cannot be shared via a UK court order .
When contemplating divorce , many people put themselves under undue stress worrying about their financial well-being . Much of that stress is due to the fear of the unknown before , during and after divorce . It is important to focus on your financial situation realistically , since doing so will give you a sense of control over your life , which in turn can reduce your stress level .
PROTECTING YOUR PENSION AND ASSETS IN A DIVORCE A divorce is never something people plan , but it should be something to plan for . There are often many assets to consider and much legislation to understand .
If you are considering a divorce and want to know more about the options available to you regarding your finances , please contact us . You can also email me at : sam . hulson @ first-equitable . com
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