Divorce and Pensions What you need to know
Dividing marital assets can seem complicated, especially when it comes to divorce and pensions and one worry for many separating couples is the division of pensions. The valuing of pensions can be very complex, particularly in the case of Final Salary pension schemes.
Main issues with divorce and pensions include :
Final Salary schemes – The true value of these pensions is complex and open to debate. The scheme will provide a Cash Equivalent Transfer Value (CETV) for solicitors to base any sharing of assets. However, the CETV is rarely a true reflection of what it would cost the other party to purchase the same benefits. Consequently, relying on CETV can lead to unequal pension benefits being provided.
Guaranteed Annuity Rates – Some older pensions may have guaranteed annuity rates of around 10%, which, given today’s low rates, could in essence double the true value of that plan. These guaranteed rates need to be taken into account when sharing pension benefits.
Tax free lump sums – some older company pension plans can offer higher tax free cash amounts. This is often overlooked and can lead to people losing out if they share the wrong benefits.
Different ages – If they are different ages, one party might be able to take their pension benefits immediately, whereas the other party, if under 55, could have to wait before drawing their benefits.
How can Logic Wealth Planning help ?
Seeking financial advice from an Independent Financial Adviser (IFA) may help you considerably as you go through the stages of a divorce. An IFA can offer value in terms of both time and money, they can discuss your financial situation with you and they can also help you prepare materials and advise on the splitting of assets.
An IFA can also help you avoid making expensive mistakes when sharing assets or investments with your ex-spouse. For example, something as simple as you ticking the wrong box when making withdrawals from an investment bond could result in an unnecessary tax bill of around £300,000!
IFAs are essential in assessing the true values of both parties’ pension benefits and how best to share these benefits. Financial planning can seem complex during and after divorce, yet an IFA can help you with financial planning and offer advice on divorce and pensions.
If you’d like friendly professional help and advice on Pensions and Divorces – or any other financial matters we are happy to help. As one of the leading IFA practices in Greater Manchester, Logic Wealth Planning has a team of experienced Financial Advisors specialising in Wealth Management. Working closely with clients in the Heywood, Rochdale, Bury and surrounding areas across the North West, we believe that however modest your income may be, when it comes to Pensions, Savings and Investments we provide the best financial advice, ensuring that your money is working hard for you and allowing you to enjoy a comfortable lifestyle right through to and including your Retirement years. For your first meeting with us – entirely free and without obligation – please call us now on 0808 1234 321. We look forward to hearing from you.