People overlooking or avoiding their pensions during divorce proceedings could be making a “huge mistake”, according to Canada Life’s technical director.
Andrew Tully said while divorce can be one of the most stressful times of people's lives, they must still get their pensions valued during proceedings - even if it might seem complicated.
There has been a 278 per cent increase in online divorce petitions since May 2018, with more than 207,000 submitted.
This is according to a Freedom of Information request by Canada Life to the Ministry of Justice in March.
People, especially women, opt to try to keep the family home without understanding the real value of the share of the pension they have given up.Andrew Tully, Canada LifeMonthly petitions using the online service have risen to around 8,000 a month, from a low of 2,000 a month.
Source: Freedom of Information request submitted by Canada Life to the Ministry of Justice and replied 23rd March 2022
But despite this, fewer than two in 10 divorces have pension sharing orders according to Now: Pensions, a campaign group trying to tackle the pensions gap.
Pension sharing orders are a way of sharing pension funds with a former spouse or civil partner following a divorce.
Under current legislation it is the only way a pension can be given to another person during the member’s lifetime – at least without incurring significant tax charges.
In practice, it forms part of the main divorce order, and the details are included in an annex to the order, the key detail being how much of the pension scheme is to be shared.
'Daunting'
“Adding pensions into the mix can be daunting, but not dealing with pensions can be a huge mistake,” Tully said.
“People often avoid or overlook pensions because they can seem complicated. Where there is a solicitor involved, they should know to get the pension valued.
“But where there isn’t, many people, especially women, opt to try to keep the family home without understanding the real value of the share of the pension they have given up.”
Filing a petition for divorce has become easier due to the introduction of the ‘no-fault’ divorce law from April 2022.
This saw the government remove the requirement for a spouse to persuade a court that a marriage has broken down irretrievably.
As a result of the uptick in online divorce petitions, Canada Life has issued a warning that pension sharing in a divorce is complicated and can be neglected when couples are separating.
The company has therefore laid out some tips:
- Couples often write wills to help with division of assets, but when you get married any existing wills are invalidated. When you get divorced any existing wills are respected unless they are updated
- Pensions are a complicated area when looking at divorce and sharing orders, attachment orders or clean breaks are all available by way of sharing assets
- Pensions in payment using annuities - on divorce, unless the death benefits for annuities are updated with new spouse details, the original beneficiary will receive any annuity benefits from guarantees
- Control of assets on divorce – the use of trusts, including spousal bypass trusts, mean you can retain an element of control over assets
- Investment Bonds can be assigned by Court order to ensure there is no tax due when assets are transferred.
ruby.hinchliffe@ft.com
