When divorce happens…

 

When divorce happens: How to safeguard your pensions

Divorce is never easy. And when it comes to untangling financial assets like pensions, things can get even more complicated.

Pensions are considered a valuable asset and are subject to specific rules and regulations when divorcing. So, if you’re currently going through a divorce or considering one, understanding how your pensions will be handled can help you be better prepared and avoid any surprises in the process.

Let’s explore what you need to know about divorce and your pensions.

1. The value of your pensions:

When dividing your assets and income during a divorce, there’s no fixed rule. The value of a pension can vary depending on factors such as the type of pension plan you have, how long you’ve been married, and how much you’ve contributed. Therefore, it’s important that you have a clear picture of what all pension assets are worth, including state pensions, private pensions (Self-Invested Personal Pensions), and any other pension you hold such as workplace pensions (Defined Benefit and Defined Contribution).

2. Pensions are considered marital assets:

In the UK, all property built up during the marriage is on the table in a divorce, including your pensions. But without professional advice, it is possible that people either forget about or ignore their pensions. In fact, according to Legal & General, only 20% of divorcees took pensions into account when dividing their assets. This is concerning and could lead to significant financial challenges in retirement.

3. How pensions can be divided in a divorce:

Currently in the UK, pensions can be managed in one of three ways:

• Pension Offsetting: One spouse keeps their pension while the other receives a greater share of other marital assets, such as property or savings.
• Pension Sharing: This involves dividing the pension assets between both spouses, usually through a Pension Sharing Order issued by the court. When you divorce, both you and your partner will know how much of the pension you’ll get. Even if one of you dies or remarries, it won’t change the agreement on sharing the pension.
• Pension Attachment Orders: Also known as ‘earmarking’, this option allows for a portion of one spouse’s pension to be paid to the other when the pension comes into payment. You will though have to wait until your ex-partner decides to access their pension or passes away for you to receive your earmarked benefits. It’s important to note that you won’t have any control over how they invest their pension funds. If your ex-partner decides to withdraw early or stops contributing, you may end up receiving less than expected.  

4. Don’t forget the finer details:

After a divorce, you need to make sure you update the beneficiaries on your pension plans to reflect the changes from the settlement. Forgetting this step could mean your ex-spouse ends up inheriting your pension benefits unintentionally!

It’s also a good idea to update or create your Will and review other important paperwork to ensure your assets go where you want them to. If you need help with this, the Joslin Rhodes Estate Planning Team is here for you!

5. Remember, you’re not alone:

Divorce can be a challenging time for many reasons, but safeguarding your pension doesn’t need to be one of them. With the help of a qualified pension specialist like Joslin Rhodes, we can help you take stock of your circumstances and most importantly, give you the reassurance that everything is going to be okay.

If you’re ready for a one-to-one chat simply tap here to connect with our local team today.

Joslin Rhodes Pension & Retirement Planning – Real Advice, For Real People