Divorce Financial Advice: Here’s what you need to know
Aside from the emotional suffering it brings, divorce can also leave both parties financially exposed. Seeking divorce financial advice will help you to achieve a fair settlement and avoid decisions that you later regret.
Unfortunately, divorce is extremely common in England and Wales, with around 42% of marriages ending in this way according to The Office of National Statistics.
Should you find yourself facing divorce it is vital that, as well as contacting your solicitor, you seek advice from an Independent Financial Advisor as soon as possible. Speaking to someone who specialises in divorce financial advice will enable you to:
- Plan for the future by setting achievable financial goals
- Consider the different pension sharing options available to you
- Build up your pension pot after divorce
- Re-examine your existing pensions and investments to make sure you are getting the most out of them
- Review and update your Will
How should pensions be split?
After the valuation of the former marital home, the pension arrangements of one, or both parties, can be the largest financial asset of marriage.
Despite popular belief, there are no automatic ‘entitlements’ when it comes to pensions after divorce. So, put simply, you won’t necessarily receive half of the other party’s pension just because you were married. Therefore, you need to protect your future finances by including pensions in your divorce discussions.
When it comes to deciding what to do with your pension pots, there are in fact a number of different options to consider. These include: Pension Sharing, Pension Offsetting or a Pension Attachment Order. You can read about these in more detail on our pension planning and divorce page.
However, the valuing of pension benefits can be very complex, particularly in the case of Final Salary Pension Schemes. So, we recommend that you work in partnership with your Independent Financial Adviser to decide on the best option for your individual circumstances.
Most pensions can be divided by a court order, either after a Decree Absolute or an agreement order as part of a negotiated settlement.
Can a state pension be split?
The basic state pension cannot be split in divorce. However, you might be able claim the basic state pension using your former partner’s state record providing that you do not get remarried. Both yourself and your ex-spouse must also be over the state pension age before you can claim.
Be aware of Pension Provider Restrictions
In the majority of cases, you will have the option to transfer out of a pension scheme and place it with any provider. However, sometimes providers have restrictions in place that don’t allow you to transfer out.
You should contact your pension provider to find out if this is the case for you or ask your Independent Financial Adviser to investigate on your behalf.
Updating your Will
Depending on whether or not your relationship is still amicable, you may no longer wish for your ex to be a beneficiary of your estate in the event of your death. If this is the case, you may need to give some thought to who the new beneficiaries will be and amend your Will accordingly.
Innes Reid Investments has excellent working relationships with a range of local solicitors who can help with Will writing. Get in touch with us for more information.
Revise or renew your life insurance
It’s essential that you review your existing life cover to ensure that it accurately reflects the changes to your situation.
As part of your divorce financial advice, your adviser can also arrange life insurance in connection with maintenance orders. This will protect your maintenance income in the event of the death of your ex-spouse, or to provide for your ex-spouse and children in event of your death.
Post Divorce Income and Retirement
An Independent Financial Adviser can also help you to move on with your life by assessing your post divorce income and outgoings, advising on a new mortgage and putting steps in place to help you rebuild your finances.
It is also essential to reassess your plans for retirement to make sure that you still have a solid plan in place now that your assets have been split and consider whether or not this will impact on your retirement age.