2 November 2016

Separating? – Don’t forget the pension!

After a long marriage, or when someone is close to retirement age, pensions can be a crucial factor in reaching a fair and proper divorce settlement, and should never be ignored. The importance of considering how a party will manage their own finances on retirement cannot be forgotten and sensible consideration is needed as part of any agreement.

Pensions can be shared between parties at the time of the divorce, tax-free by way of a Pension Sharing Order, attached to a Consent Order, which has been sealed by the Family Court. After the divorce either party is then free to continue on and build up their pension pot without suffering any further obligation to their ex-partner. An appropriate share could:

•    Equalise the parties’ income on retirement at that point
•    Share the capital value of the parties’ respective pension provisions
•    Take into account capital that one party is receiving from other assets such as the matrimonial home and equalise total assets, this is known as “off-setting”

Many people do not realise that the pensions accumulated during the course of the marriage and any period of cohabitation leading seamlessly into marriage are used for calculating division and you must not forget to include any additional voluntary contributions made which are often listed separately.

The importance of considering all the assets of marriage when divorcing have become far more relevant for the over 55’s since the Government allowed beneficiaries to take tax-free cash out of a pension at that age.  The ability to take cash out of a pension may make it possible to re-house both parties, particularly as it can be much more difficult to obtain a mortgage over the age of 55.

At Hayes + Storr we help clients reach an agreement with an ex-partner in a fair way under the “Resolution Code of Conduct” which promotes an amicable approach to separation.  Sometimes the parties have been able to reach an agreement themselves and they simply want help to implement as above. Whatever your position, it can be sensible to take professional advice, as it is not necessarily a straightforward issue.

Article by Robert Colwell.

This article aims to supply general information, but it is not intended to constitute advice.  Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead.  However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy.  Always seek our specific advice.

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