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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
ex-civil 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 ex-
partner; 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.
[email protected]
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