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

Protecting Divorce Maintenance Payments

Even if you are divorced (or going through the process), protecting the family in the event of your death should still be a priority. If you think about it, if you were still married you would want to know that your family was protected if you died. Just because you no longer love your ex-spouse does not mean that you would still want to protect your children. At least they still love you!

One possible way of thinking about this is the amount of maintenance you pay and capitalising this amount to give the total amount needed to ensure that they still get their money if you die.

And talking of the maintenance you pay, if you think about what you have agreed to in your financial settlement and you are paying both spousal maintenance and also child maintenance, this might be agreed as separate amounts. This might be specified in your Consent Order. You may want to set up two payments from your bank account so that each payment can be evidenced, rather than merging both payments into one (even if they are being paid to the same bank account) such as your ex-spouse’s. Although this might be a bit of extra hassle, it may make things clearer if there is a dispute at a later date and payments records are required or if maintenance payments are to be adjusted.

Protecting your payments

Maintenance is usually paid by standing order from the payer’s bank account, but in certain circumstances it can be capitalised as a single payment to the recipient in advance so that he or she is not reliant on the payment each month. This may give the holder of the maintenance some additional security and, from another point of view, some maintenance payers prefer it this way because it keeps contact to a minimum.

For those who have agreed to pay a regular maintenance payment, they may also be required to take out life assurance cover to protect the maintenance payments if they should die in the early years, leaving a family without income. In certain circumstances one ex-spouse takes out life cover on the other. The insured ex-spouse will have to co-operate as medical underwriting may be required and he or she will need to sign the life assurance application forms and fill in the medical questions required. If the spouse is taking the policy out on the life of the ex-spouse then he or she is insuring ‘The life of another’. If the cover levels you require are high, then the medical underwriting may take a little time so make sure that you start the process with time to spare. Most Life Assurance applications can be resolved and completed in around six to eight weeks.

The maintenance receiver pays the premiums for the life cover. This gives the person who receives the maintenance the protection of knowing that the life cover will remain in place and that the premiums required will not stop when no one is looking (or placed in Trust to someone else) because the proceeds will always be paid to the policy owner.

Speak to your financial adviser about the cost of this protection before requesting this as part of your settlement in case the premiums required for the cover are prohibitive. They may also be able to use an existing protection policy, if available and appropriate.

To expand on all things divorce and the fundamentals, I have been able to outline the full process in my new book, Addicted to Wedding Cake, The Journey of Divorce.

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, Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority

Autumn 2010 Pension Planning and Changes

With the new coalition government in place, many changes have been proposed for pension planning. I have listed two examples of these below.

State Pension age for men increasing to 66 from 65 in 2016

The State pension age for men is to increase to 66 from 65 in 2016. This is another change that may see a refocus in your pension planning strategy and would recommend that all clients check their state pension benefits if they have not done before. If you would like further guidance on achieving a forecast then please let us know.

Pension Contributions

Some clients trying to make larger pension contributions to enjoy the relevant tax advantages in recent times have had to consider new restrictions applied by HM Revenue and Customs to restrict the level available. These restrictions are now under review and we may see changes to these rules by April 2011. Clearly this is a changing situation and if this situation affects you then please let me know and we can start planning as new information and regulation becomes clearer.

If you plan to review your pension planning in light of these proposals and changes then seek Independent Financial Advice (IFA). This is not designed to provide individual advice. Churchouse Financial Planning Limited is a Chartered Financial Planner and Independent Financial Adviser based in Surrey. They can be contacted on 01483 578800.

Keith Churchouse

Director, Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority

Where were you squeezed? Emergency Budget, June 2010

We all knew that it was not going to be pretty, but George Osborne certainly seems to have ‘grasped the nettle’ of controlling the UK’s debt and fiscal policy. Time will tell if it is successful in hitting its fiscal targets.

The headline changes are likely to be:

* The increase in VAT from 17.5% to 20% from January next year. This could also have an effect on inflation.

* It should also be noted that Capital Gains Tax (CGT) allowance of £10,100 will remain in place which is good news. Above this, the flat rate of CGT will increase from 18% to 28% for higher earners from midnight tonight (staying the same for basic rate tax payers) , which falls more in line with its former levels and in line with the levels applicable in Europe.

* It is also good to see the tax free personal allowance will increase by £1,000 to £7,475 from April next year. The target is still to increase this level to £10,000 per annum.

* For business, many directors and business owners being pleased to see corporation tax rates being reduced over the next 4 years, by 1% per annum.

As ever, I am sure the devil will be in the detail and there are many other areas, such as:

* A pay freeze for Public Sector employees (earning over £21,000 per annum)

* Increase in Bank Levy’s

* Capital allowance changes for business/ Extention of 10% entrepreneurs releif to £5M from £2M

* Green Investment Banks

* Up rating of benefits from RPI to CPI (a fall of around 1% per annum based on past years)

* Child Benefit frozen for 3 years

* No plan to join the Euro in this parliament

This is the first of the new coalition Governments budgets and it will be interesting how well their fiscal policy will control the problems of the UK economy. It will also be interesting to see how the markets and credit agencies respond, which based on initial reactions seems to be positive. Time will tell if this is maintained.

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. No individual advice is provided in this comment and you should seek independent financial advice for your own needs.

A tale of satisfaction!

An existing client hit some financial difficulties and unfortunately ran out of options as to how to solve his financial woes. During his working lifetime he had accumulated a reasonable size pension fund and as this was the last remaining financial assets, other than the house, I provided some financial advice on ways that this could be used to release tax free cash and to provide some much needed income for the household economy. He had lost his employment and was retraining to follow another career path which would provide sufficient annuity income for him and his wife to clear their debts and get themselves back on their financial feet.

Although taking benefits early, which is usually not advisable, we agreed that the best course of action was to use the pension fund to release tax free cash and annuity income (via an Open Market Option) and the future looks brighter for the client, having qualified for his new role and with his finances in better order.

The reason why I am blogging about this, is that it very easy to get tied up in the technical facts, pension rules and tax calculations of our work, after all that is what we train for. However, particularly in this example, our advice made a real and positive difference to a clients life and prospects for the future. The client is delighted and correctly feels that he has turned a corner and I feel satisfaction that we have helped a client to realise their potential with the help of independent financial advice (IFA).

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. This example does not provide any financial advice and each individual should seek independent financial advice before taking any action with reference to their own arrangements.

Success! Delivering professionalism with British Standards/ ISO22222 for another year

As you may have noted in my previous blog, I recently undertook my third annual assessment for ISO22222 Personal Financial Planning. This is the British Standards for Personal Financial Planning and assessed by Standards International. As before, I would like to thank Standards International for their support and guidance for the assessment and the past three years we have been working together.

I felt that the assessment went well, and this morning I received confirmation that I had passed the assessment well. I am obviously delighted.

One point that I did not know is that Standards International have been working closely with Which?(The Consumer Association) who have always been extremely supportive of those advisers that have achieved ISO 22222 certification. As such they will add my contact details onto their database which is given to Which? members who require assistance and information relating to financial advice. This agian demonstrates the benefits of undertaking this rigourous assessment.

But what does the assessment undertake and why blog about it?

The details were mentioned in my previous blog, however, the reasons are that, in my opinion, this is one of the most important qualifications that can be achieved in the financial advice industry. The difference with the ISO22222 Personal Financial Planning assessment is that they look at the nitty gritty of what has actually been delivered, at the coal face if you like, to the clients you have seen and helped over the last year’s period. So the assessment is about what has been delivered, what the client receives, the structured format that they receive it, allowing full two way communication and not what you can remember from your text book studies.

The improvements that have been made to service over the last 3 years can be attributable in part to the processes that they recommend and implement to ensure that our clients, the most important individuals in any financial planning process, are served in an ethical, profession and timely fashion to make sure that their expectations are met and exceeded when planning their finances for their futures.

Obviously delighted with the news this morning and I look forward to continuing to meet the standards into the furture.

Keith Churchouse, Director of Churchouse Financial Planning Limited in Guildford, Surrey

Author of Sign Here, Here and Here!…Journey of a financial adviser

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

Oh what a night!

No, not the catchy song from the 60’s, or South Africa losing to Paraguay in their world cup match, but the proposed shake up of financial services regulation.

As noted in my recent book, Sign Here, Here and Here!...Journey of a financial adviser (ISBN: 978-0-9564325-0-6), change in financial services regulation seems to be inevitable and regular, with significant regulation effects being felt in 1988 and 1994 to name a few examples.

The handover of significant authority from the FSA to the Bank of England will take time and its effects, I am sure will be far reaching. From a financial advisers point of view, there were many proposals already being worked on leading up to a radical change at the end of 2012, namely the Retail Distribution Directive, or RDR as it is known.

I think that it is a good thing that Hector Sants, the Chief Executive of the FSA, is staying on to oversee these changes and this will provide continuity for a difficult role. Let’s face it, all things banking and financial services have been fair game for criticism, however we all need these services and they remain vital to our economy.

I think that it is good news that this nettle has been grasped and although I am sure there will be some pain over the next year or two with the transition to 2012, I believe that this unfurling news should be welcomed.

I look forward to the future together with our clients.