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Pensions and Divorce

Pension and Divorce

How do we assess what happens with Pensions and Divorce.

Are you getting your fair share? – What are your options?

Please read the following Pensions and Divorce summary and  if you should have any questions regarding your circumstances or options, feel free to contact us.

Pensions and Divorce law have changed over the years and many financial advisers and indeed solicitors tend to avoid many of the considerations through lack of modern knowledge, or inexperience.

Divorce and separation are more common than ever and rates are continuing to increase, specialist advice on how to share their assets more than ever.

As the number of divorces in increasing, Pensions and Divorce advice is also getting much more common.

As pensions are complicated, historically they have been an asset that is often overlooked on divorce, or indeed split in a way that does not suit both, or sometimes either party.

Pensions and Divorce

IT NEEDN’T BE A STRAINED AWKWARD CONVERSATION, IT CAN BE A PROFESSIONAL AND FAIR PROCESS THAT SUITS ALL PARTIES.

There are now 3 main ways of sharing the assets within pensions on divorce:

  • Offsetting

  • Earmarking

  • Sharing

Each of these has its own merits and pitfalls.

Offsetting

This allows the parties to set the value of other assets against the pension.  This is the most common method of sharing assets, primarily as it has been around the longest.  As the current value of assets is typically used, this can give an unfair split where assets are likely to increase or fall in value.

Earmarking

This allows the parties to split the rights to the benefits of the pension when it becomes payable.  When the pension is due to pay out, it will pay both parties, with each party getting the percentage agreed upon in the divorce.  Unfortunately, the person that owns the pension has complete control over how the pension monies are invested and when they pay out, which could reduce the value of and delay the payment to the other person.

Sharing

Following relatively new legislation, the courts have introduced pension sharing, which allows the parties to split the pension into two individual pensions upon the date of divorce.  Unlike Earmarking, this allows each party to retire when they want (within the pension scheme options) and to manage their own monies how they see fit.

Pension sharing is fast become the favourite option for splitting pensions on divorce, as it is seen as a complete and clean break away from one another.  Unlike Offsetting, it ensures that one party does not get an unfair proportion of one asset and less of another.  Both parties get their fair share of all assets, including the pensions.

Please note each divorce is different and it is important that you seek guidance from a solicitor and independent financial adviser to select the options that best suit your circumstances.  Please contact us for further information.

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