Pension pots take centre stage in divorce settlements

Pension pots take centre stage in divorce settlements

More than 15,500 divorcees were ordered to share their pensions with their former spouse in the past year, with divorcing couples finding it difficult to reach a financial settlement without sharing or splitting a pension pot.  

According to research from financial advice firm Salisbury House Wealth, it is now common for a pension pot to be the second highest value assets in a divorce settlement. 

Statistics from the Ministry of Justice (MoJ) showed 18 per cent of divorces, where financial awards were made, involved pension splitting or attachment orders. 

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Salisbury House Wealth pointed to several options for divorcing couples to split their pensions, highlighting the value of financial advice in this situation.

For instance, couples can arrange a pension sharing order, in which a share of the pension pot is transferred from one individual to their former spouse.  

Alternatively, they can opt for a pension attachment order, in which the pension pot remains with one of the partners, but the income is divided when it is drawn down.

Tim Holmes, managing director at Salisbury House Wealth, said: "Pension awards can be a major financial windfall after a divorce, but without financial planning, the money might not hold its value.

"Divorcees receiving a large lump sum instead of the drawn down pension need to be especially careful that they are investing the sum to make it last them through their retirement.

"Divorces are a stressful time for both parties, but the financial decisions made then will have lasting consequences. Seeking third party advice can be helpful, particularly when dealing with [complex cases]."

His comments come in the wake of a recent Supreme Court ruling, which prompted adviser to urge people to consider the long-term financial effects of certain life events.

The court ruled the former spouse of a businessman had no right to receive an increase in the payments made to her after she managed her finances poorly.