Michelle is an award-winning chartered financial planner who holds the designation 'Fellow of the PFS' demonstrating her commitment to maintaining the highest standards of knowledge, ethical conduct, and professional practice. Michelle is also an accredited member of the Society of Later Life advisers. Michelle offers a fully personalised service tailored to each clients individual needs and goals, using an approach that was recognised and honoured by the Women in Financial Advice awards in 2021. Clients working with Michelle can expect a high level of professionalism, integrity and a lasting relationship built on trust and open communication
Every divorce situation is unique. Often pensions are the largest asset after the home, so they should be considered in all cases. But there are some circumstances where they might be disregarded.
Say, for example, a couple is separating and they have very similar pension provisions. In that case they might not need to do any sharing or splitting – but I would advise both parties to disclose the details to be considered.
There are three ways that a pension can be split on divorce. The first one is quite simple and is called offsetting. That’s where the value of your pension or that of your spouse – or part of it – is offset against other assets from the marriage.
It could be that the value of a pension is offset against a large investment portfolio. Then the pension wouldn’t be split at all. The pension owner would keep ownership and the other party would get a larger split of the alternative assets.
Secondly, you could have attachment orders, although these aren’t often used anymore. Here, the pension, income or lump sums are earmarked for the spouse for later on in life – usually when the pension member takes their benefits. There are some problems with that, so it’s best to get advice before agreeing to it.
Finally, there’s pension sharing. This is where pension benefits are split at divorce, and the person receiving the share of the pension has the pension credit and the person who is having their pensions shared has a pension debit. That’s more of a clean break.
Yes, it’s possible, but it all depends on what’s fair in terms of dividing the assets.
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No – your basic state pension or the new state pension can’t be shared. However, there are some additional state pension benefits that can be shared. People may remember Serps or S2P – anything that increases your state pension above the basic income can be shared. Sometimes it’s called additional state pension or protected payments.
However, if those benefits are shared and then the spouse or partner that’s taken the share then goes on to remarry or enter another civil partnership, those benefits would be lost.
It depends on your situation. If your pensions are subject to a sharing order, it will reduce your pension benefits and ultimately reduce your overall retirement income. Working with a financial advisor can help identify whether that shortfall can be made up before retirement.
All finances held in single names and joint names are considered in a divorce. It’s definitely possible that your pension and payment will be considered as part of the financial award to your ex-partner.
The pension provider may charge to provide the calculations used in divorce proceedings. They’re also highly likely to charge to implement any sharing orders. So once you have decided on the financial settlement and how the pension is going to be shared, you would have to contact the pension provider and let them know what’s going to happen. They’re likely to make a charge at that point.
It’s also worth noting that a financial advisor will charge for any specialist reports relating to pension sharing or advice on pension sharing. They will also charge for the implementation of a pension sharing order.
The pros for pension sharing, as opposed to earmarking or offsetting, is it gives you a clean break. It means both parties from the marriage can move forward without relying on the other in the future.
It can allow for fair division of the assets, and makes sure that both parties have pension provisions going forward. Remarriage and death doesn’t affect pension sharing.
In terms of the cons, somebody’s future income and lump sum is going to be reduced, plus fees are payable to the provider when the asset is being split. With some pensions, it’s really difficult to implement the pension sharing order, and it can take some time.
Lastly, some higher earners could be impacted by lifetime allowance charges. However, the lifetime allowance is set to be abolished in 2024, so it’s unlikely to cause long term money problems – but it is something to be aware of.
When we tell you about a fee, you will always receive a clear explanation of: The total fee, the advice service it relates to, how it's been calculated, when you need to pay it and your payment options.
If you’re in this situation and you haven’t been working with a financial advisor, you definitely need to get some advice. A good financial advisor will help you consider all of the options available to you. Sometimes you have the choice to remain in your ex-partner’s pension scheme, and sometimes you don’t.
Plus, just because you have the option to, it doesn’t mean to say that it’s in your best interests. You need to make sure you’re making a good decision for your future and your circumstances.
A financial advisor will be able to help you decide. If you’re not able to stay in that pension scheme, we will advise you on the best home for your pension.
DIVORCE PLANNING/SETTLEMENTS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
THE VALUE OF PENSIONS & INVESTMENTS AND ANY INCOME FROM THEM CAN FALL AS WELL AS RISE. YOU MAY NOT GET BACK THE AMOUNT ORIGINALLY INVESTED.
ESTATE PLANNING IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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