Why it is vital to include pensions in your divorce settlement
By Jones Myers Partner, Nicki Mitchell – Mediator, Child Inclusive Mediator and Collaborative Family Lawyer
As I receive an increase in the volume of divorce enquiries after the challenges of the festive season, I cannot emphasise enough the critical role that pensions play in financial settlements.
Their importance has been further re-inforced by financial analysts’ New Year calculations that spouses could lose up to £665K by overlooking pensions and I failing to take them into account in divorce settlements.
Pensions are frequently one of the most valuable assets of a marriage, often making up the second highest – or sometimes the highest – value asset in a divorce settlement after the family home.
It is key that information about pensions is made available in the financial disclosure process, which must take place before any binding financial settlement can be made.
Disclosure must include details of all pensions, including state pensions – and the value of each one. This ensures that couples are able to make informed decisions as to what a fair settlement looks like for them
The most common way in which a disparity in pensions is addressed in a divorce settlement is pension sharing which provides a clean break between parties, as the pension assets are split immediately.
Alternatively, in some cases ex-spouses prefer to take a greater share of the equity in the family home or other capital, as a trade-off for a share of the other’s pension.
Some divorces may involve several pension arrangements so it is important to consider which arrangements should be shared, and to what extent.
The pension share may be internal (when the recipient becomes a member of the scheme) or external when the share must be invested in an existing or new arrangement of the receiving party. Care should be taken to obtain details of the cost of any transfer.
In deciding what is best for them, the couple need to consider how their respective financial needs will be met and what other assets are available for distribution.
Alternative and non-confrontational ways for divorcing couples to reach a financial settlement without a lengthy and expensive court process include Mediation and Collaborative Family Law.
Both options – in which I have extensive expertise – are conducted in a spirit of mutual co-operation and put children’s best interest first.
At Jones Myers we always recommend that divorcing couples seek expert advice from highly experienced lawyers regarding their finances. Independent Financial Advisers can assist with pension valuations and projected future incomes.
Taking guidance early on will avoid the risk of losing out on what could be a substantial pension sharing provision that spouses are entitled to – and which can prevent long-term financial issues.
For queries on pensions in divorce or any aspect of family law, call 0113 246 0055 (Leeds) 01423 276104 (Harrogate), 01904 202550 (York). Visit www.jonesmyers.co.uk, email info@jonesmyers.co.uk or tweet @helpwithdivorce
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