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Pensions and Divorce

Pension funds can be a neglected topic when discussing the financial impact of divorce but after a home, a pension fund is often the second-largest asset owned by a couple. There are several ways to split a pension but achieving a fair resolution of all the financial issues can be a very stressful process. This is especially true when the care of children and other dependents is involved. 

At Francis Clark Financial Planning, we’re highly experienced in pension advice. We can advise you and your legal representation on how to achieve a fair resolution. Our aim is to minimise the stress around this difficult situation and help you to achieve a fair outcome.  

Our pension & divorce advisers are here to help

We fully understand how difficult a divorce can be and a smooth process is often what both parties want to achieve. Our financial planners are on hand to help you establish exactly how much your pensions are worth, so you can move forward from an informed position, and divide pension assets as quickly and amicably as possible. 

How do you establish your joint pension position?

It’s becoming increasingly common for individuals to have multiple pensions. A couple can easily have six pensions between them with the inclusion of work pensions, personal pensions and state pensions. 

Older pensions and certain workplace pensions may offer guaranteed incomes or annuity rates. This can make it difficult to understand the real value of these pensions. 

Our financial planners will be able to break down the figures and give you a clear and balanced picture of what your pension situation looks like.

What is a transfer value & why is it important?

During divorce proceedings or the dissolution of a civil partnership, pensions will be valued using the cash equivalent value. This is often referred to as the ‘transfer value’ as it will help you understand the amount you would be entitled to if you transferred your pension. Due to transfer fees, this can be less than the actual fund value of your pension. 

To understand the value of your pension, we’ll work directly with you and your pension provider. They will be able to provide a cash equivalent transfer value for your pensions that is dated at your separation. Your pension provider will also be able to create a statement showing how much wealth was accumulated throughout the duration of your marriage or civil partnership which is relevant for divorce proceedings in Scotland. 

How can you divide your pension fairly? 

Depending on where you are located in the UK, the rules on pension and divorce can be quite different. While England, Wales & Northern Ireland share the same legislation and rules surrounding pensions and divorce, Scotland differs. For example, Scotland will only consider the pension benefits accrued throughout the duration of the marriage or civil partnership. 

There are also differing rules between England, Wales & Northern Ireland, and Scotland on how pension divisions can be formalised. Our financial planners are well versed in all UK regulations and will be able to help you, wherever you’re based. 

Do you need a court order during pension & divorce proceedings?

A court order can seem like an intimidating prospect and you may think it’s only necessary if divorce proceedings have broken down. In fact, court orders can be a routine part of divorce.

In England, Wales & Northern Ireland, court orders are the only way to create a binding pension sharing order. However, you can agree to offset your share of your pension by giving away other assets of equivalent value. 

If your pension position is complex, Francis Clark Financial Planning also has individuals who can attend court as an expert witness to explain your pension provision clearly.

It is incredibly important to work with a professional when understanding whether or not you should go for a pension sharing order (or equivalent in Scotland) through the court or not. At Francis Clark Financial Planning, we are on hand to help with professional advice. 

How do you deal with post-retirement divorce?

Dividing your pension can become a more difficult prospect if your divorce happens when you are already retired and making use of your pension. How you proceed with your divorce post-retirement will depend on many factors such as amicability, assets and health. 

Getting expert financial advice from a financial planner can make this difficult process much easier. 

The financial impact of divorce

Divorce or the dissolution of a civil partnership can massively impact your financial plans. Many long-term financial plans will have been made with a dual-income in mind, or a specific breadwinner, which will need to be re-evaluated post-divorce. It is also common to sell shared assets, such as a family home, or one person will need to have their share of the home bought out from them. 

All of this can have a huge financial impact and our financial planners will work to help you understand your financial position post-divorce. 

Post-divorce financial planning

After a big life change like a divorce or dissolution, it’s the perfect opportunity to begin planning for your future. Our financial planners can offer expert advice and practical steps on retirement planning, later life planning and lifetime financial forecasting. This will help you understand your financial situation and whether you’re on the right path to achieve your financial goals and future objectives. 

Expert pensions & divorce financial advice you can trust

Making sure you receive the right advice during one of the most difficult and stressful periods of your life can feel like an unnecessary worry. Choosing a financial planner that will not only lighten the load but also enable you to get the best out of your assets is key.

At Francis Clark Financial Planning, we offer a wide range of financial planning services aimed at individuals. The right financial planning can give you freedom over your financial future and more confidence in the now. We can work with clients remotely, or you can visit us in one of our eight offices across the beautiful southwest of England.

Want to find how you could benefit from pensions and divorce advice from Francis Clark Financial Planning? Get in touch with us today.

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To book your initial consultation (no cost or obligation), please fill in the form below with your details and one of our financial planning experts will be in touch.

“I have been delighted not only with the standard of advice, but also with the administrative back-up of Francis Clark. The three key elements for me in a financial advisor are trust, empathy and good communication skills and Ian ticks all those boxes and more.”
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Retirement Planning FAQs

  • What is the difference between a defined contribution and defined benefit (or final salary) pension?

    A defined benefit pension (also known as a final salary pension) is usually set up by your employer. It guarantees you a regular income in retirement, usually based on your salary and the number of years you have worked. The level of income may also increase in line with inflation.

    On the other hand, defined contribution pensions do not offer you a guaranteed level of income. The amount of money you will have in retirement depends on how much you or your employer has contributed and how well your pension investments have performed.

  • How much can you pay into a pension?

    Usually you can pay as much as you earn each tax year into your pension, up to a maximum of £40,000. This is your annual allowance.

    The allowance reduces for people with an adjusted annual income of £240,000 or more, down to a minimum of £4,000. This is known as the tapered annual allowance.

  • What is the tapered annual allowance?

    The usual £40,000 annual pension allowance is cut for people with an adjusted annual income of £240,000 or more. The allowance reduces by £1 for every £2 of income above £240,000, down to a minimum of £4,000. This is known as the tapered annual allowance.

  • What is pension carry forward?

    Pension carry forward lets you pay more than your annual allowance into your pension by ‘carrying forward’ unused allowance from the previous three tax years (as long as you have sufficient earnings). You still will receive tax relief on the payments and it can be useful for those affected by the tapered allowance.

  • What is the lifetime allowance and how much is the tax charge for breaching it?

    The lifetime allowance is the amount you can hold in your pension over your lifetime. The allowance is currently at £1.0731 million. Your pension is assessed against the allowance when you take benefits, die or reach age 75. Any excess is taxed at 25% on top of Income Tax if taken as income, or 55% if taken as a lump sum.

  • What are the tax benefits of pensions?

    Investments in pensions grow free from Income Tax and Capital Gains Tax. Pension contributions are paid from gross (pre-tax) income. Where tax has already been paid on a pension contribution it is refunded. The taxman will automatically top up pension contributions up to your annual allowance by 20% to cover basic rate tax. Higher or additional-rate taxpayers can then claim back any higher or additional-rate tax that they have paid on contributions through their tax return.

  • What are your options for taking an income from your pensions?

    You can normally take up to 25% of your pension tax-free – either as a single lump sum or as a series of smaller withdrawals. You can also take a regular income from your pension by making lump sum withdrawals, buying an annuity or setting up income drawdown.

  • What happens to a pension when you die?

    A defined benefit (final salary) pension will usually stop paying an income when you or, if your pension income passes onto a dependant, your dependant dies. A defined contribution pension can be passed on to your beneficiaries. If you die before the age of 75 the pension will be passed on tax-free. If you die after 75, your beneficiaries will pay their usual rate of Income Tax on any money taken from the pension.

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