When it comes to dividing up assets on divorce, pension rights can turn out to be one of the most valuable elements – and often the most overlooked.
The transfer values of final salary pension schemes have been at record levels over recent years. In a paper published last October, the Financial Conduct Authority reported that employee benefit consultancies were recording “the average size of transfer at over £250,000”.
The regulator’s focus has been on the wisdom of moving such final salary pension benefits to other pension arrangements. However, there is another aspect of large transfer values that is worth thinking about: the role they can play in divorce settlements.
A final salary pension benefit could be the single most valuable part of a financial settlement in a divorce. Yet there is anecdotal evidence that pensions are sometimes overlooked when agreeing a settlement, perhaps because their value is not fully appreciated, or it can all seem too difficult when more immediate practicalities are the primary concern.
In the UK, there are currently three main ways of dealing with pensions on divorce:
Each option has its advantages and disadvantages and it is possible that the divorcing couple will see different routes as offering the best solution. For example, pension sharing and pension attachment orders/earmarking both require a court order to take effect, but this isn’t necessary for offsetting.
If you are ever involved in a divorce, make sure you get expert guidance on your pension options. There may well be more than one pension involved and it might be difficult to obtain the relevant data, so the sooner you seek advice, the better. Contact us now and we can:
Please get in touch if you would like to discuss your circumstances with one of our team of advisers.
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