Silver divorces among pensioners is on the increase forcing more advisers to have to work out complicated pension splitting options for clients, advisers have claimed.
According to Andy James, head of retirement planning for Tilney Bestinvest, there has been an increase in the number of older people seeking divorce in retirement.
He said: "In recent years we have seen an increase in the number of ‘silver divorces’.
"Pension plans often form either the first or second (after property) most valuable asset for those in later life and therefore careful consideration of how this should be dealt with should be given, especially when neither party is in employment."
However, he said this could be "tricky", as what might be best for one party doesn’t necessarily suit the other and therefore getting an equitable outcome is often difficult.
Richard Morley, partner for BDO's tax dispute resolution division, said questions of divorce were often raised in January, prompting an increase in clients seeking financial advice on asset division.
He said: "January is notorious, more so than any other month, as the time when many couples file for divorce. Divorce, by its very nature, is always a difficult and emotional journey.
"While the repercussions on family and money are likely to be high on both parties’ agendas, tax is also an important consideration and there are numerous tax issues that may affect each party’s wealth before and after separation and divorce."
As outlined in FTAdviser's January 2017 Guide to Pensions and Divorce post-freedoms, which qualifies for 60 minutes' worth of CPD, there are three options for couples seeking to pension share on divorce.
Offset – this is where other assets are transferred to the ex-spouse in lieu of the pension value and would be designed to give a fair overall split without touching the pension/s itself.
Earmarking – this is where pension income and/or tax free cash available to the pension owner is earmarked to the ex-spouse. So while the pension remains in the hands of the original owner, certain amounts are paid over to the other party either as a one-off or on an on-going basis.
Pension sharing – here the pension/s are valued and are then split in an agreed manner (as per a Court Order) with a certain percentage going to the ex-spouse. Both parties will therefore end up with a pension in their own name.
Mr James added: "All three methods have advantages and disadvantages, so careful consideration needs to be given as to the best option."
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