Pensions are always a big topic in divorce cases. After the family home, they are often the most valuable asset in the family pot. Working out how to properly value a pension for the purposes of negotiations in a financial settlement can be difficult and it is common for divorce solicitors to use a pension expert to help.
What does your work as a pension planner involve in divorce cases?
We provide technical expertise and on hand practical advisory support to Family lawyers, barristers and their clients to help navigate through the complex rules that can significantly impact on the financial outcome on the pensions pre & post-divorce for both parties.
Very broadly, my role is to understand a client’s current circumstances and establish how best to match their financial resources to what they are trying to achieve, or help them to reappraise what they realistically can achieve when appropriate. This may include provision of reports to establish how best to value pension entitlements accrued pre-marriage, Annual Allowance calculations, Life Time Allowance calculations, cash flow forecasting to establish sustainable levels of income based on a capital sum, review & assessment of existing pensions to assess suitability to give up to/receive a pension credit/share, ‘translation’ of actuarial pension sharing reports, risk profiling etc.
Why are pensions important to consider when getting divorced?
Frequently, apart from the matrimonial home, pensions are the most valuable asset within a marriage. Therefore, it is important that they are considered very carefully. How best to split the value to ensure a fair outcome is often not just a straight forward 50/50 split. This might be because of age differences, open market forces e.g. advisory/product costs, investment risk, the impact of legislation, the disconnect between the way that defined benefit pensions (such as final salary) and defined contribution (personal pensions/SIPPs) are valued etc.
Pensions have always been an important part of the financial planning process because of the valuable tax breaks. However, since 2016, the government’s Pension Freedoms reforms has meant that the tax breaks are now complimented by far greater practicality & functionality, than in the past, that actually work in the real world.
How do you help clients who are already divorced?
Even in modest pension sharing cases the amounts involved can run into £100,000s. The purpose of a pension sharing order is to provide a degree of financial security in the future. It is important that the pension and if applicable non-pension investments are still there and sustainable when needed. We regularly review clients’ investment & pension portfolios to monitor performance relative to their requirements and to ensure income sustainability throughout life.
What advice would you give someone going through divorce when it comes to their pension?
Seek specialist help, take time to ensure that you understand your pension(s) better. Despite perceptions they are always valuable, review regularly. My mantra is summed up in two words – dialogue & diversification.
Why is pension planning important?
For most people the various tax benefits available on pensions are the best around. The legacy of pension funds on death for the family (and other nominated beneficiaries) is very tax efficient and accessible without probate.
From age 55, contemporary pensions are totally accessible & controllable – a tax efficient very practical financial resource that can not only provide tax efficient way of saving for your future financial security but also a lasting legacy to your family that cascades tax efficiently down the generations.
Andrew Potter specialises in all aspects of pension planning and is also a Chartered Financial Planner. He has a wealth of experience in pensions and works closely with many family law solicitors, barristers and clients in divorce cases.
As a divorce consultant, I work closely with my clients throughout their divorce, providing support every step of the way. Part of this involves making sure they have the right “team” of specialists around them to help them understand their options, enabling them to make informed decisions about their financial settlement. I can put my clients in touch with other professionals and resources to assist with the different issues which may arise in their case. I also work with clients beyond their divorce to help them to adjust to their new independent life and start to plan for their future. To find out how I might be able to help you in your situation, get in touch with me here.
If you have found the tips in this blog useful then you will find lots more in my ebook “Tips for Coping with Divorce” which you can download here: free ebook.
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