Pensions and Divorce Page

Pensions and Divorce

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Financial Advisor, Carol Lammy-Steele, explains how she helped to enhance a client’s life by providing help and support to someone going through a divorce.

Divorce and Finances

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Protecting your assets and preparing you for going forward on your own.

Divorce involves many loose ends, both emotional and financial. It can generate high levels of uncertainty and financial stress, as it impacts on all areas of your life, from living arrangements to assets and pensions. That’s why financial planning through a divorce is essential to help protect your assets and prepare you for going forward on your own.

Making the right financial decisions during your divorce can be difficult. You may be worried about your future and how you will support yourself and your family. Divorce is a difficult time emotionally and financially. It is important to obtain professional financial advice to help you through this challenging period.

This will help protect your interests, ensuring that you receive a fair outcome and your future is secure. It will also enable you to have a clear understanding of your current financial situation. This includes knowing what assets and debts you have, as well as what income and expenses you have each month.

Future finances

You’ll need to be realistic about your future income and expenses. That means putting a realistic budget in place so that you can make informed decisions about your future finances.

Don’t overlook any tax implications based on any financial decisions you make. This is especially important if you are considering selling assets or transferring property.

Dividing pensions in divorce

One of the most important assets to consider is your pension. Pensions are often overlooked in divorce settlements, but they can be worth a significant amount of money. It is important to get professional advice to make sure that pensions are taken into account in any settlement.

There are several options for dividing pensions in a divorce, and the best option will depend on your individual circumstances. You may be able to keep your pension in its current form, or you may need to transfer some or all of it to your ex-partner.

Divorce settlement

Whatever you do, make sure that you obtain professional advice before making any decisions about your pension. It is one of the most important financial assets you have, and you need to make sure that it is taken care of in your divorce settlement.

With careful planning and communication, you can make the transition as smooth as possible to help you move on with your life and make a fresh start.

5 top tips when it comes to finances and divorce

  1. Get organised

Gather your financial documents to help you and your lawyer understand your financial situation and make the best decisions.

  1. Make a budget

Be honest with yourself about your income and expenses. This will help you make informed decisions about your finances going forward.

  1. Understand your rights

Speak with a lawyer to understand your rights and responsibilities during the divorce process. This will help you make decisions that are in your best interests.

  1. Communicate with your spouse

If you have children, it is important to communicate with your spouse about financial matters. This can be difficult, but it is important to try to reach an agreement on child support and other financial issues.

  1. Obtain professional financial advice

This will help ensure that you are making sound decisions with your finances during this difficult time. There are many factors to consider when going through a divorce. The advice will help you understand the financial implications of the decisions you make, and provide guidance on how best to protect your interests.

If you have any questions about your pension or other financial assets during a divorce, please contact us.

Important information: Divorce settlements are not regulated by the financial conduct authority.

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Our Pension Services

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We offer help and financial advice on all aspects of pension planning, from the basics of pension savings and tax-relief to the more complex areas of pension sharing on divorce and estate planning.

There are various benefits of pension planning including tax relief, potential cost savings and legacy planning.

One of the main benefits is making sure that you are on track to meet your retirement goals. Our Financial Advisors use sophisticated cash flow forecasting software to help you bring your financial future to life.

Divorce and my Pension

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  • The UK currently holds £15.2 trillion pounds in household wealth
  • Private pensions represent the biggest single component of this wealth – at around 42% of the total (£6.4 trillion)
  • Agreeing a fair separation of this pension wealth at a time of divorce will be critical to the future financial wellbeing of both parties

If you’re going through a divorce and would like to discuss your options regarding your pensions then please contact us.

Divorce and Finances

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Divorce is often referred to as one of the most traumatic and stressful events anyone can go through, and it can also be a costly experience. Financial Planner, Carol Lammy-Steele explains how she helped one of her clients through this difficult life experience.

If you’re going through a divorce, one of the many things you’ll need to think about is your pension. If you would like to discuss your options, please contact us.

A male looking sad when thinking about his pensions and divorce

Divorce and Pensions

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A male looking sad when thinking about his pensions and divorceEnsuring an equal division of all the assets within the matrimonial pot.

The breakdown of a marriage is often referred to as one of the most traumatic and stressful events anyone can go through. Divorce can also be a costly experience, often including legal fees, a new home, a new car and new childcare costs. So, it’s perhaps predictable that so many need to rely on savings or credit cards for support during this time.

When dealing with finances on divorce, the starting point is an equal division of all the assets within the matrimonial pot. It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension.

Relevant factor in any divorce

It’s common that one party will have significant pension provision, and the other party may have little or none. Clearly, this could be a relevant factor in any divorce.

Figures[1] show that in 2020 there were 103,592 divorces granted in England and Wales, but with a new law that came into force on 6 April 2022 making it much easier for couples to get divorced through a ‘no fault’ plea[2], this figure is likely to increase in the coming years.

Impact of divorce on finances

Thinking about family finances may be the last thing couples want to do at this difficult time. However, it’s important to understand the impact that divorce will have on finances, including pensions.

The UK currently holds £15.2 trillion pounds in household wealth[3]. Private pensions represent the biggest single component of this wealth – at around 42% of the total (£6.4 trillion). Agreeing a fair separation of this pension wealth at a time of divorce will be critical to the future financial wellbeing of both parties.

Average age reaches an all-time high

As a result of divorce, as many as nearly one in five (19%) say they will be, or are, significantly worse off in retirement. The average age for getting divorced has reached an all-time high of 47 years and 5 months for men and 44 years and 9 months for women[4], so it’s fair to assume that the levels of wealth accumulated in couples’ pension pots may also be fairly high.

The research suggests that;

  • one in seven (15%) of divorced people didn’t realise their pension could be impacted by getting divorced
  • and more than a third (34%) made no claim on their former partner’s pension and it was not included as an asset in the settlement when they did divorce.

Significantly worse off in retirement

Worryingly, almost one in twelve (8%) divorcees say they didn’t have their own pension savings as they were relying on their partner to finance their retirement. As a result of divorce, as many as one in five (19%) say they will be, or are, significantly worse off in retirement. It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension.

To supplement their income following a divorce;

  • a third of divorcees (32%) said they dipped into their savings
  • one in five (20%) used credit cards for everyday living expenses
  • a similar number (18%) borrowed from friends or family
  • and just over one in seven (15%) regularly sold clothing/toys/other household items just to make ends meet.

Future retirement income at risk

One in eight (12%) respondents admitted to having to go out to work, having not worked before their divorce, or get a second job (10%). Worryingly, one in eight (12%) also cut back, or cancelled, their pension contributions – putting their future retirement income further at risk.

There are several options available to the Family Court when dealing with pensions and divorce – pension sharing, earmarking and offsetting against other assets[5]. It can often be a very complex issue so, as well as hiring a family lawyer, couples should consult a professional Financial Adviser to walk them through the pension valuation and financial process.

How can we help with your pension?

If you’re going through a divorce, one of the many things you’ll need to think about is your pension. What will happen to it? Who will get
what? These are important questions to ask, because pensions can be a significant asset in a divorce settlement. If you would like to discuss your options, please contact us.

Source data: The research was conducted by Censuswide between 07/04/2022!13/04/2022, with 1,008 respondents who have been through a divorce in the UK. Respondents are referred to as divorcees or divorced people throughout.

[1] Divorces in England and Wales – Office for National Statistics (ons.gov.uk)
[2] New divorce laws will come into force from 6 April 2022 (gov.uk)
[3] Total wealth: Wealth in Great Britain (ons.gov.uk)
[4] Divorces in England and Wales – Office for National Statistics (ons.gov.uk)
[5] Aviva Adviser: Pension and Divorce (avivab2b.co.uk)

Pensions and Divorce

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  • The average age of divorce is now 47 for a man and 44 for a woman
  • One in seven (15%) didn’t realise their pension could be impacted by getting divorced
  • A third (34%) made no claim on their former partner’s pension when they divorced
  • One in twelve (8%) divorcees don’t have their own pension and were relying on their partner to finance their retirement
  • One in five (19%) divorcees will be significantly financially worse off in retirement because of a divorce

Source: https://www.aviva.com/newsroom/news-releases/2022/05/thousands-risk-pension-poverty-after-divorce/

Financial Advice: Enhancing People’s Lives

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Financial Adviser, Carol Lammy-Steele explains how she helped to enhance a client’s life by providing help and support to someone going through a divorce.

Dealing with Divorce

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Revolution in family law finally removes the need for blame as a basis for divorce

No one enters into marriage expecting it to end in divorce. However, for many couples, divorce is the sad reality. If you are facing divorce, it is important to know that you are not alone. Each year, thousands of people go through the divorce process.

While divorce can be a difficult and emotionally charged time, there are things you can do to make the process go more smoothly when important decisions need to be made. Keeping a level head to negotiate a fair financial settlement is vital.

No-fault divorce removing the need for blame

From 6 April 2022 no-fault divorce came into effect in England and Wales. This is a long-awaited revolution to family law, finally removing the need for blame as a basis for divorce. Now the only ground for divorce is that the marriage has ‘irretrievably broken down’.

This means the law no longer requires blame to be apportioned, neither is there any requirement to !it your particular circumstances into one of the five facts that you previously had to prove, i.e. there is no need to cite behaviour or adultery nor wait for the minimum two-year separation period.

More amicable resolutions for parties

In addition, further crucial changes are that the respondent to the divorce is now unable to contest the divorce (the limited grounds to challenge a divorce relate to jurisdictional grounds or validity of marriage).

If you and the other party both agree the marriage has broken down irretrievably, then a joint application for divorce can now be made.

If you find yourself in this situation, here are 5 points to consider

1. Seek professional advice immediately

Seek legal and separate financial advice immediately. Your professional Financial Adviser can help you draw up a list of joint and personal assets and valuations, so any legal advice you seek is based on accurate information. This can make an appointment with your solicitor more time and cost effective.

You’ll need to draw up a list of assets e.g. first or second homes, pension pots, investments, value of any businesses etc., checking when they were purchased and finding out if they should fall into the category of marital assets. In addition, list all your outgoings both joint and individual.

2. Cancel all shared finances

Cancel any financial commitments that might be in a joint name immediately. The more unscrupulous partner could take advantage otherwise and saddle you with debt you are liable for. So cancel credit cards, joint accounts, personal loans and even overdrafts if possible and set up afresh in your own name.

3. Timing is everything

Although it may be the last thing on your mind, choosing the right time of year to divorce could significantly impact on the financial outcome for each individual. When a marriage or registered civil partnership breaks down, it is likely that tax will not be at the top of the agenda.

Your tax position refers to the amount of Income Tax and Capital Gains Tax you’ll need to pay. During the divorce process, there is a window of time where a spousal exemption applies and then drops off.

4. Splitting pensions

When it comes to pensions, finding a way to achieve a clean break so you are not tethered to your partner forever is key. What can be divided depends on where in the UK you are divorcing. In England, Wales and Northern Ireland the total value of the pensions you have each built up is taken into account, excluding the basic State Pension.

In Scotland, only the value of the pensions you have both built up during your marriage or registered civil partnership is considered. Normally, anything built up before you married or after your ‘date of separation’ does not count. There are two main ways of dealing with pensions at divorce that apply across the UK.

1. Pension sharing is often the favoured way of dividing a retirement fund because it achieves a ‘clean break’. This involves couples splitting one or more pensions. The aim is to ensure that the future incomes of both spouses are equalised. Your professional Financial Adviser will be able to help you implement any pension sharing order after the splitting process is complete.

2. The second option, pension offsetting, sees pension rights balanced against other assets, such as the home. Typically, if one spouse has a pension fund worth £500,000 and the couple jointly own a property worth £500,000, one may keep the property and the other keep the pension – though things are rarely that simple, so professional advice is key.

5. Budget for your future

Whatever happens, your life is going to be very different once the divorce is complete so it’s important to budget for the future life you want to live. Obtaining a copy of your credit report is a good start, so you know what your standing is, especially as many people will need to think about a new mortgage after divorce. A credit report will also highlight any joint lending you might be liable for.

Financial planning for divorce – what do you need to know?

Obtaining professional financial advice can be invaluable in guiding you through the myriad financial decisions from valuing and splitting pensions, financial disclosure and income planning, to valuing investments, managing tax and implementing court decisions to get your finances back on a sound footing. To discuss your options, please contact us.

a child sitting with their parents who are getting a divorce

Mind the divorce gap

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a child sitting with their parents who are getting a divorceWomen see incomes fall by 33% following divorce, compared to just 18% for men. Divorce is an emotionally charged event – and can be an expensive one. The financial impact of divorce can also last for decades and carry on into older age. Women are also often impacted harder financially by divorce, new research highlights.

Many women are likely to see their household incomes fall by a third (33%) in the year following their divorce, almost twice as much as men (18%) and are significantly more likely to waive rights to a partner’s pension as part of a divorce (28% women versus 19% men)[1].

Financial struggle post-divorce

Women are more likely to face a financial struggle post-divorce (31% women versus 21% men) and worry about the impact on their retirement (16% women versus 10% men).

Office for National Statistics (ONS) data shows, on average, women already have a significantly smaller pension pot than men. There are many reasons driving this disparity, one being that women are typically paid less, while men who divorce are far more likely to have been the primary breadwinner in the relationship (74% men versus 18% women).

Greater degree of financial burden

This is why women will likely feel a greater degree of financial burden if transitioning to a single-income household and are likely to face financial struggles following a divorce from their partner (31% women versus 21% men).

This is particularly true for older women who divorce. One in four divorces occur after the age of 50 and women are significantly more likely to worry about the impact of their divorce on their retirement (16% women versus 10% men).

Rights to a key financial asset

While there is only a slight difference in the number of men and women who feel that the division of their finances at the point of divorce was fair and equitable (54% men and 49% women), the research found that many women may be signing over their rights to a key financial asset.

Women are significantly more likely to waive their rights to a partner’s pension as part of their divorce (28% women versus 19% men). This could have a significant long-term impact, particularly as women tend to have less personal pension wealth, according to the most recent findings from the ONS [2].

Plan to protect your financial future

In most families, the two largest assets are the family home and a pension fund. If you’ve made the decision to file for divorce, it’s time to gather as much information as you can and figure out the plan to protect your financial future. Please get in touch to find out how we can help you – we look forward to hearing from you.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. You should seek advice to understand your options at retirement.

Source data:

[1] Opinium Research for Legal & General ran a series of online interviews among a nationally representative panel of 2,008 UK adults aged 50+ who are divorced from 19-23 September 2020.
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/pensionwealthingreatbritain/april2016tomarch2018