While I was driving to meet a friend for lunch earlier this month, I was listening to the radio and learnt that the first Monday of January is dubbed Divorce Day.
I have to admit, I wasn’t aware of that but if you think about it, the stress of family life in the run-up to Christmas and then with New Year resolutions, it can be a time of harsh reflection.
And as I sat down to write this piece, I heard that Ant McPartlin of Byker Grove and I’m a Celebrity fame is divorcing after 11 years of marriage. It got me to thinking, it is very easy to get married and also very easy to divorce, but the ramifications financially can last for years.
The two largest assets that married couples normally have are their house and their pension, not a great surprise when you think about it.
But what amazes me is that many divorces get a long way through the process before the splitting of the pension assets is even thought about. We know this because sometimes as an administrator, we are one of the last to know.
Don’t leave it to the lawyers
If it has got to this point, unwittingly the solicitors may have done more harm than good and it is important for the financial services sector including advisers and providers to help educate the legal profession and in particular our own professional connections on the need to involve the provider or administrator as early in the process as possible.
There are a number of things that need to be considered, independent valuations are needed and also an understanding of the scheme’s policy on sharing orders, and details such as any protections that are in place and may be lost or breached, leading to an unwanted tax bill.
The complete financial picture is needed before a decision is made on how to take account of all the assets a couple have, not just the house, children and animals.
In terms of the pension assets, these can be split in one of three ways normally, it could be a percentage share of the former partner’s pension pot (pension sharing), it could be offset against other assets such as the family home (offsetting) or some of the pension is paid to the former spouse, like a maintenance payment (earmarking).
Once the divorce and pension assets are sorted out, it is also important for clients to ensure their wills and expression of wishes forms are updated and continue to be reviewed at least annually.
Elaine Turtle is director at DP Pensions
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