In the UK, divorce is a legal process that involves the end of a marriage. According to the ONS, one in five couples end their marriage before their ten year wedding anniversary, which is a slight decrease from historical data previously released by them. However, for those couples who do choose to separate, it is never an easy decision to make.
The concept of ‘No fault divorce’ was brought in by the Divorce, Dissolution and Separation Act 2020, which means that from 6th April 2022, divorcing couples do not need to provide a reason nor provide blame. It also removes the possibility of a contested divorce where one spouse must wait for the other to agree.
Overall, this has made it easier but financial provisions can still be complicated and cause grief and stress between divorcing couples. This is largely because people are not aware of how their finances and pensions may be split during the process.
PENSIONS AND DIVORCE
Divorce can have a major impact on pensions and retirement planning.
Many people do not know that their pensions could be included in their financial settlement in the event of a divorce (or dissolution of a civil partnership).
Additionally, even when a settlement is agreed, any agreement on ‘sharing’ pension arrangements will still need to be confirmed by a court order.
HOW WILL MY PRIVATE PENSION BE VALUED IN THE EVENT OF DIVORCE?
When a marriage or civil partnership ends, a court will normally deal with the pension arrangements in one of the following ways. The court will consider factors such as the length of marriage and each partner’s financial circumstances when calculating pension arrangements.
You are given or give away a percentage share of a pension arrangement – known as a Pension Sharing order
The value of a pension will be offset against the value of other assets – known as Pension Offsetting
You are allocated, or will allocate, an amount of pension and/or lump sum – known as Pension Earmarking
An Independent Financial Planner can complement the services of a solicitor to make sure that you avoid common pitfalls during a divorce settlement. This is why it is so important to consult an expert when valuing pension rights to make sure you understand what happens to your pension afterwards.
If you would like to speak to one of our Independent Financial Advisers about your pension, or any other aspect of financial planning then please contact us or call 01257 260011.