Professional Services

Divorce

What happens to your pension and investments when you divorce?
Top 100 Financial Advisers Members 2020

Many marriages end in divorce so it’s worth considering what would happen to your pension and investment pots if you and your spouse split.

The number of people divorcing in later life is increasing and not only does it put couples under emotional strain it also creates complications concerning their pensions and retirement plans. Marital status has a large impact on the strength of a retiree’s finances. Property plays a big part in a divorce with the family home often at the centre of the battle. There is another asset that is just as important, the pension.

Pension transfer specialist

In the portfolio team we have financial advisors who are pension transfer specialists, and as such they can advise on complicated pension transfers including pensions in divorce.

There are three ways to consider a pension in a divorce settlement:

  1. Off-setting
    The first and increasingly common way is through off-setting. This is where the whole pension is taken, typically by the husband, and the wife is given other assets, such as property or cash of equal value.
  2. Pension sharing
    The second method is pension sharing. This allows a pension fund to be split between the spouses. The divorcee is allocated a proportion of their ex spouse’s pension savings and they can either take the money and place it into another scheme or they may be given an option to have their own scheme with the existing provider.
  3. Earmarking
    The third method is earmarking which is when a portion of a pension fund is attributed or ‘earmarked’ for the divorcee for future use. This can only be accessed when the ex spouse who owns the fund crystallises their benefits.

Working with your solicitor

A divorce solicitor will be able to help you to establish which one of these options works best for a couple who are going through divorce proceedings.
An independent financial advisor can help you value your pensions and we can also talk through your options with you. In addition, if you elect to have a pension sharing arrangement and want or need to transfer accrued pension benefits from a scheme, we can advise you on an appropriate pension scheme to transfer the capital into.

Pension valuation

Before a couple can calculate how much they will receive from a split pension or investment plan, a valuation is needed. Valuing a pension can be an especially complex process, especially if the pension is a defined benefit (DB) scheme where the total transfer value of the pension pot is determined by actuarial calculations. We are able to assist with valuations if we have the member’s permission to do so.