Getting divorced? Don’t overlook the importance of pensions
A study which reveals that seven out of 10 divorcing couples do not include pensions in their divorce settlements re-enforces our previous concerns about women struggling financially during their retirement.
Even more disturbing is the fact that 58% of participants indicated that pensions were never discussed when negotiating a financial settlement.
Pensions – the second highest value asset in a divorce settlement after the family home – often make up on average 42% of the household wealth.
They are vital in the financial disclosure process of divorce. This entails producing a full statement of divorcing couples’ current earnings and assets). It also includes full details of all pensions including state pensions along with the value of each one.
The financial statement aims to ensure that detailed negotiations can take place. This is to enable both ex-spouses receive a fair settlement which could include a division of the pension benefit fund.
Pension sharing, the most popular method of reaching a divorce settlement, enables a clean break between parties in respect of capital claims. In most cases, the pension fund permits a transfer of a percentage of the pension to another pension provider.
The pension share is not compulsory. In some instances, a party may prefer to take a greater share of the family’s home or other capital, abandoning any claim against the other party’s pension.
It is important to assess how the parties’ finances will be in the years ahead to avoid and any longer-term financial problems.
Some divorces may involve several pension arrangements so it is important to consider which ones should be shared – and to what extent.
Expert advice from an Independent Financial Adviser will help with this along with a valuation and projected future incomes.
The pension share may be internal (when the recipient becomes a member of the scheme) or external.
A pension share must be invested in an existing or new arrangement of the receiving party. Utmost care should be taken to obtain details of the cost of any transfer.
The Court will look at the needs of the parties and what other assets are available for distribution.
Agreeing financial settlements which avoid going to Court can be resolved through alternative processes including Mediation. Here, an impartial third party “the mediator” helps separating couples to discuss issues confidentially and find workable agreements.
There is also Collaborative Family Law where a “no court” agreement is signed at the beginning of the process so that there is a shared commitment to finding an agreed resolution.
Another choice is Arbitration where a Family Law Arbitrator (‘judge’) decides the outcome of divorce financial settlements.
Once an agreement (Award) has been decided with the above processes, details are sent to the court for an order to set in the place a pension share.
Sadly, going to Court is sometimes necessary. Jones Myers experienced lawyers advise on options best suit our clients.
For queries on divorce, pension sharing, finances, or any aspect of family law, call us at Leeds 0113 246 0055, Harrogate 01423 276104, or York 01904 202550. Visit www.jonesmyers.co.uk, email firstname.lastname@example.org or tweet us @helpwithdivorce