Why Including Pensions In Divorce Settlements Is Essential
The volume of divorce enquiries traditionally escalate in January following the challenges and strains of the festive season.
Jones Myers Partner Nicki Mitchell
Jones Myers Partner, Nicki Mitchell, a Mediator, Child Inclusive Mediator and Collaborative Family Lawyer, emphasises the critical role that pensions play in financial settlements - and urges divorcing couples not to overlook them.
The importance of pensions has been further reinforced by New Year calculations from online investment service, Interactive Investor, whose financial analysts say spouses could lose up to £665k by failing to take pensions into account in divorce settlements.
Pensions are frequently one of the most valuable assets of a marriage, often making up the second highest - or sometimes the highest - value asset in a divorce settlement after the family home.
It is key that information about pensions is made available in the financial disclosure process, which must take place before any binding financial settlement can be made.
Disclosure must include details of all pensions, including state pensions - and the value of each one. This ensures that couples are able to make informed decisions as to what a fair settlement looks like for them.
The most common way in which a disparity in pensions is addressed in a divorce settlement is pension sharing which provides a clean break between parties, as the pension assets are split immediately.
Alternatively, in some cases ex-spouses prefer to take a greater share of the equity in the family home or other capital, as a trade-off for a share of the other’s pension.
Some divorces may involve several pension arrangements so it is important to consider which arrangements should be shared, and to what extent.
The pension share may be internal (when the recipient becomes a member of the scheme) or external when the share must be invested in an existing or new arrangement of the receiving party. Care should be taken to obtain details of the cost of any transfer.
In deciding what is best for them, the couple need to consider how their respective financial needs will be met and what other assets are available for distribution.
Alternative and non-confrontational ways for divorcing couples to reach a financial settlement without a lengthy and expensive court process include Mediation and Collaborative Family Law.
Both options, in which I have extensive experience, are conducted in a spirit of mutual co-operation and put children’s best interest first.
At Jones Myers we always recommend that divorcing couples seek expert advice from highly experienced lawyers regarding their finances. Independent Financial Advisers can assist with pension valuations and projected future incomes.
Taking guidance early on will avoid the risk of losing out on what could be a substantial pension sharing provision that spouses are entitled to – and which can prevent long-term financial issues.
With headquarters in Leeds and offices in York and Harrogate, Jones Myers is a multi-award winning family law practice which has consistently achieved top tier rankings in legal guides for almost three decades.
The firm’s Harrogate office is located at 5 Victoria Avenue, HG1 1EQ, www.jonesmyers.co.uk For queries on all aspects of divorce and family law, call 01423 276104.
ABOUT NICKI MITCHELL
With three decades of experience in family law, Nicki specialises in the financial aspects of relationship breakdown - and particularly complex cases involving family businesses, multiple properties, and complicated pension arrangements.
A skilled Mediator, Child Inclusive Mediator and Collaborative Family Lawyer, Nicki champions Alternative Dispute Resolution processes which avoid a lengthy court process and can lead much more quickly and cost effectively to a successful resolution.
Her exceptional track record also includes advising clients on the more traditional methods of resolving issues surrounding family breakdowns.
