Getting divorced? Don’t forget about the pension
October 2, 2020
Julia Weber, Solicitor at Hegarty Solicitors in Oakham, urges those thinking about a divorce not to forget about pensions when sharing marital assets.
Pensions are often the second most valuable asset after the family home and may even be the largest, but according to a Scottish Widows report, a staggering 71 per cent of divorce settlements do not take pensions into account. This affects women in particular, potentially leaving them with a significant pension shortfall in later life.
Divorcing couples may be unaware that pensions are marital assets that can be shared. Often they prioritise splitting property and savings, and making arrangements for children without considering pensions. Women can be disproportionately disadvantaged by this approach because pay inequality and time off to raise children impacts their ability to save for their retirement, which may then be compounded by a failure to take pensions into account on divorce.
Before a financial settlement is agreed, a divorcing couple should provide full financial disclosure to each other so that a fair settlement can be reached. This includes the disclosure of all financial assets including property valuations, savings, investments, bank balances, personal assets, income and importantly, pension valuations. This is unlikely to happen where couples agree a settlement between themselves and they may have no idea of the value of each other’s pensions.
Pensions are varied and complex and this may be one of the reasons they are so often overlooked or ignored. However, agreeing a settlement that may meet financial and/or housing needs now but fails to take into account future financial needs is short-sighted. What is needed is comprehensive advice from a ‘Pension on Divorce Expert’ (PODE) to ensure that all pension options have been considered before a settlement is finalised.
It is important to bear in mind that pension sharing is currently optional. Also, it can only be dealt with by way of a financial Court Order and such an Order can only be obtained as part of divorce proceedings. There are many professionals who consider that where assets comprise a pension or pensions, it should be compulsory in divorce proceedings to include a pension report by a PODE or as a minimum, evidence the couple have received advice from a PODE. This way the Court would know that pensions had at least been taken into account, even if not actually included in any settlement.
Parties often cite legal costs as a reason for undertaking a ‘DIY’ divorce and/or financial settlement. However, this can be a very hazardous approach as it may be impossible to rectify an inadequate settlement agreed without appropriate legal advice. The experienced family team at Hegarty Solicitors strive to minimise costs by keeping clients out of court and negotiating a financial settlement where at all possible. So, a better way to think of paying for expert legal advice is to focus on the long-term gain, which may be considerable where pensions are concerned, rather than any short-term pain.
For further advice about pensions on divorce, Julia offers an initial consultation for just £150.00 (plus VAT).