We have seen an increasing number of older couples getting divorced which seems to be down to a few reasons, such as the increasing financial independence of women and the reduced stigma attached to divorce. Another factor is no doubt that older couples are less likely to have young children such that “staying together for the sake of the kids” is no longer a consideration. How does this affect pensions?
Changes to rules on pensions
Since 2014 the rules relating to pensions have made these assets more flexible, providing more options for the couple when separating out their finances. The rules relating to pensions are complex and in many cases involving older couples their pension(s) will be a valuable asset, second only to the family home. It is therefore essential that all options involving pensions are explored with accurate information about their values. We will often need to engage an actuary to provide advice on value, income on retirement and the impact of different options such as sharing or offsetting.
Pension sharing is when a specified percentage of one party’s pension is carved out and credited to the other spouse either by way of an internal or external transfer.
Pension sharing does not apply to the new state pension. Sharing can become quite complicated when applied to Defined Benefit Schemes which are related to salary and may have other benefits which are difficult to quantify.
In Defined Contribution Schemes, the cash value is divided on a percentage basis at the time of implementation of the pension sharing order. The percentage to be debited depends on whether equality of income at some future date or equality of cash equivalent values is required.
In summary, although many of us find pensions a rather dry topic, it is one that requires even more careful consideration in cases involving older couples.
If you need some advice and support, please get in touch via firstname.lastname@example.org or call us direct on +44(0)20 7091 2869. We are here for you.
The above is accurate as at 9 April 2018. The information above may be subject to change during these ever-changing times.