Often the pension is ignored when considering the divorce settlement. Research by Scottish Widows reveal that only one in eight (13 per cent) of divorced women could remember pension being discussed as part of their divorce settlement.
This is despite experts agreeing that the pension is often one of the most significant financial assets, depending on the length of the marriage.
The main thing is to establish what pensions your client and their former partner has. They will then need to get valuations for these pensions from the providers so that the court can consider them.
Clare Moffat, technical manager of Prudential, acknowledges valuing pension assets was more difficult than valuing a house.
According to Ian Naismith, pensions expert at Scottish Widows, the relevant value is the ‘cash equivalent transfer value’, but if the scheme is told it is in connection with a divorce it should automatically give the right value.
Hannah Foxley, Chartered financial planner at The Women’s Wealth Expert, said it was absolutely essential that your client get a really clear idea of what all their outgoings are each month.
They will also need to give consideration to future expenses such as school or university fees for the children and any other regular or one off expenditure. They also need to be absolutely clear about what their assets are.
“This is the information that is required for the form E, which is the financial disclosure part of the divorce process. Failure to complete this correctly can have legal consequences as well as errors in settlement calculations.”
They will also need to consider any current joint protection policies and the beneficiaries of any trusts that were set up in the marriage.
Ms Foxley says: “Some providers will allow changes to be made as a result of a divorce, some will not, so it’s important to check before cancelling policies with potentially valuable definitions such as older critical illness polices.
“The client will also need to consider their will. It is likely that their spouse is an executor and beneficiary of their will and once separation has occurred, they may not want this.
“Although divorce will have the effect of omitting the former spouse from the will, they would still benefit up until the decree absolute is granted.”
Ray Chinn, head of pensions and investments for LV, says clients should be made aware that, once divorced, they may still be able to use their ex-spouse’s national insurance contribution to help increase their state pension without negating their former partners state pension rights.
When it comes to making decisions about finance and divorce, Ms Foxley says it was vital to decide which method of divorce is the most suitable.
“Consideration should be given to mediation, collaboration and arbitration. Some may even consider a DIY divorce, although I firmly believe that both financial and legal advice should be sought.”
The Resolution website contains information on all of the methods of divorce.
