The Perils Of Pensions in Divorce
It’s critical that, as part of the separation process, couples take time to think about and discuss one of their single most valuable assets, their pension.
Pensions can be among the largest assets in a divorce, usually second only to the family home and sometimes even more valuable. It is often the case that one spouse in a divorce may have significantly higher pension assets than the other. This is why it is so important to take legal advice about the options available to you.
According to statistics from Aviva, recent research has shown that careful consideration as to the division of pension assets on divorce is sadly not the case for many separating couples. According to research, 15% of divorced people didn’t realise their pension could be impacted by getting divorced and more than a third (34%) made no claim on their former spouse’s pension and it was not included as an asset in the settlement when they did divorce. Worryingly, almost one in twelve (8%) divorcees say they didn't have their own pension savings as they were relying on their spouse to finance their retirement.
Comparatively, the UK currently holds £15.2 trillion in household wealth and private pensions represent the biggest single component of this wealth – at around 42% of the total (£6.4 trillion).
As a result of divorce as many as one in five (19%) say they will be, or are, significantly worse off in retirement.
Those going through a divorce often perceive pensions to be shrouded in mystery, leading to pension valuations being misinterpreted or misunderstood. It is, of course, difficult to understand the true valuation of pension assets as sometimes benefits aren’t clear from simply the value attributed to a scheme on an annual statement. It can even be the case that pension statements for different schemes look, at first glance, to have the same value, however, in reality they are far from equal. There are some pension schemes that are renowned to be very valuable, including NHS, Teachers’, Police and Local Government pensions. These can be some of the most complex schemes to understand and detangle.
Professional advice is required to firstly establish the true value of the pension assets and the best way to apportion them within a settlement. The involvement of experts can be invaluable, helping to ensure that fair outcomes are achieved.
If you are facing a divorce, or the possibility of one, pension should be a key consideration in any financial settlement. We can help you find out how to split the pension assets fairly, to ensure your retirement income is protected as far as possible.
Research borrowed from - Thousands risk pension poverty after divorce - Aviva plc
