Pension pots are often one of the most valuable assets in the family finances and should be considered carefully when negotiating your divorce financial settlement.
It is common for one of the couple to have a much more valuable pension pot than their spouse.
It is important to get the right professional advice about the pensions, to ensure you reach the right agreement as to what should happen to them.
There are 3 different types of pension pot and it is important to know what to consider should you have each one.
Lottie Kent is a Chartered Financial Planner and Resolution Accredited Divorce Specialist, and her company is True Financial Design Ltd. In this guest blog, she explains the 3 different types of pension pots:
“The different types of pension pots include:
State Pensions
A state pension is provided by the government once you reach state pension age, which is currently 66. Pension age can increase over time (and currently is doing exactly that). This is given to you if you have paid national insurance contributions. Benefits vary depending on the age of the individual and their contribution record.
Defined Contribution Pensions
These are the most common type of private pension and are also known as ‘money purchase schemes’. The pension pot is ‘defined’ by the contributions you (and often your employer) make to it. Its value is based on how much is paid in, how long it has been invested for and how well the investments perform.
Defined Benefit Pensions
Defined Benefit pensions are workplace pensions, run by your employer. The pension pot is not ‘defined’ by what you pay in but by what benefits the pension promises to give you when you retire.”
How Lottie can help
A lot of clients don’t know what pension pots they have and which pots they are entitled to. Lottie can help them understand the different pension pots they and their ex have, ensuring the client fully understands what dividing them on divorce will mean to them.
To find out more about working with Lottie for financial planning advice, click here.
It is always important to make informed decisions when reaching your divorce financial settlement and obtaining advice about pensions is crucial. You will want to understand what the pensions could provide, to help you decide how best to approach them in your financial agreement.
If you have found the tips in this blog useful then you’ll find lots more in my eBooks, which you can purchase and download today.
To read more of my blogs on the topic of Finances, click here – Finances.
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