All things pensions in divorce

Pensions can be a complicated subject at the best of times. You probably know that already! When it comes to pensions in divorce, then the situation can get very complicated. Getting good advice at the outset from an individual who is qualified in the subject is usually worthwhile, as you will see.

It may be possible in your case that a pension share may be involved. This may involve both parties getting some property equity, but this equity is effectively traded for a part share of a pension value. If agreement is reached, then a pension share order (or Pension Annex) will be granted by the court and the percentage of the pension that is to be split away is usually transferred out to another pension arrangement of the recipient’s choice, dependent on the scheme. Also note that any agreed transfer out of a pension may incur administration fees by the original provider concerned and I have considered the issue of pensions and their benefits in detail in my book, Addicted to Wedding Cake, The Journey of Divorce.

There was another alternative for pension benefit division introduced in 1995 Pensions Act called Earmarking. This has not been widely used because it may not achieve a ‘clean break’ in pension terms and does not allow the ex-spouse to receive a pension income until the originating spouse with the pension fund actually draws benefits and retires. Death and remarriage will also effect this option. Some pension providers, usually final salary schemes, allow the share to stay within the scheme, although this is not always the case. If this is achievable then it should be considered carefully along with any other options. Remember that some pensions can give benefits in different ways and you may come across Personal Pensions (PPP), Section 32’s, Retirement Annuities (RA’s), Guaranteed Annuities and Executive Pension Plans. Quite a maze and don’t forget your State Pension Benefits. You should speak to a qualified Independent Financial Adviser (IFA) about the options available, but I recommend that you search hard for an adviser who knows the subject well as it is a specialist area.

Whatever you do, get independent financial advice on the real monetary values of what you and your partner hold in pensions, as an example. This is partly because you do not want to give away too much by transferring a Cash Equivalent Transfer Value (or CETV for short) to an ex-spouse.

The independent financial adviser (IFA) can be instructed by you individually or, with agreement, both parties to get an overall view of the financial situation to demonstrate true values of pensions and there benefits. Some IFAs are affiliated and accredited by the organisation Resolution and it might be worth your while enquiring about this accreditation from your financial adviser as their numbers have been growing across the UK. They have received training and testing as a ‘Financial Neutral’ in helping a separating couple with the pensions and financial affairs in divorce situations.

Further details of this new book are available at our websites, www.addictedtoweddingcake.co.uk or on Amazon here.

Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA) to help with advice on this issue. This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority