Pensions aren’t just a consideration for pensioners. They are often one of the largest assets people own. So if you’re getting a divorce it makes sense for pensions to be a part of the conversation surrounding your finances.
But the vast majority of people don’t. They’re often overlooked or forgotten, with the more immediately pressing issues of children and property taking precedence. And understandably so.
But it’s important to make sure you are not losing out on any pension benefits.
It’s quite common for there to be a big difference between the private pension values of the divorcing couple. If, for example, one has given up work or gone part time to look after children, this will affect their pension. But it doesn’t affect their rights. This is why it’s important to take expert advice about how to address this issue.
Your long-term financial future is just as important as the short term. It’s an unfortunate fact that women have been historically worse off when it comes to pensions. Many are the primary carer for children, so are either not earning or have seen their income reduced. And even for working women, the gender pay gap also causes a disparity. In fact, divorced women are currently losing out on a staggering £5bn in pension payments annually.
So, if you are getting divorced, taking your spouse’s pension into account is a must to protect your financial health in later years. Your solicitor can advise you how to do this, in one of three ways:
Attachment orders entitle you to all or part of your ex-spouse’s pension when it becomes payable. This is usually on retirement or death. But if your ex decides to stop paying into the pension, or delays their retirement, this will have a negative impact on you. One for careful discussion with your solicitor.
Offsetting means one spouse will keep their pension but the other will receive a greater share of the assets. This is a complex method, however, so expert advice is essential here. You will need to ensure there are enough assets to compensate the spouse not receiving a pension.
Sharing orders will divide pension benefits between you both at the time of the divorce. You can choose to keep it in the same scheme or move it to your own pension fund. This option isn’t applicable to the state pension.
Divorce is complex. And pensions are complicated. Bringing the two together can be something of a minefield. We always recommend taking specialist advice in these matters to ensure a fair outcome.
The Lester Aldridge family team deal with these and other issues on a regular basis and are frequently instructed by clients regarding divorce proceedings.
If you would like to discuss any aspect of separation, arrangements for your children or wish to protect your assets prior to getting married, contact the family team on 01202 786161 or email [email protected]