Advisers need support with complex divorce advice

Advisers need support with complex divorce advice

Divorce and the transfer of pensions is a very complicated area that a lot of advisers need to get third party support on, according to FTAdviser’s latest podcast guests.

Appearing on the latest edition of the FTAdviser podcast, Seven Stages co-founder and director Rachael Hall, said when advising on divorce and how to split pension assets, advisers need to get support from actuaries, providers and legal experts as it is an area many IFAs are unfamiliar with.

Unfortunately, a gender pensions gap exists and men are more often than not better off in retirement than women, but divorce often plays a role in this as many do not take into account a partner’s pension.

When going through a divorce the court can make a pension sharing order to provide a transfer from a spouse with a greater pension provision to the one with the lesser. 

But many people do not know this exists. For example, a 2021 study looking at divorcees aged 55-64 found that men had an average total private pension fund value of £100,000, while women had accrued just £19,000. 

Hall said while there are experts on divorce advice around the country, it is not necessarily a service that is provided traditionally by advisers.

She added: “It's a complex area for our industry because we're looking at splitting assets and what the tax implications are.

“I do think there is a new generation of advisers coming through that are specialising in this and are niching. But I think in terms of it being a core part of an IFA practice, this is not necessarily the case.”

Also appearing on the podcast, Canada Life technical director Andrew Tully, said with changes coming into force, which will give divorcing couples an extended window in which to transfer assets without incurring capital gains tax charges, it is important industries work together.

He said: "Financial advisers working together with the legal professional really is the best combination.

“With things like changes to capital gains tax, lawyers might not be immediately aware of what is happening. 

“It could be that transferring assets after 2023 is the best option and that's what a financial adviser can help look at.”