Pensions & Divorce: The four things you need to do

For most people navigating through a Divorce is an emotional and complex process, and without professional guidance, the importance and value of pension pots can often be over-looked by both parties.


Pension pots are usually extremely valuable assets and it’s important that you consider any pension provision in your overall settlement. This stops any future debate on the topic and secures your long term financial future.


Midland Financial Solutions Director and Chartered Financial Planner Kevin Edwards outlines the four things that you must do before you divorce to protect yourself from future financial floundering…


  • Get an independent financial evaluation: Pensions are often overlooked in a divorce settlement; however, they can be extremely valuable assets to possess, particularly if they include a Final Salary Pension. Find out its value to you and fight for a fair deal – don’t let your Spouse’s lawyer dictate what the pension is worth. Commissioning an Actuarial Report can be a good measurement tool for larger pension pots (around £750-£1,000+vat). This report will show a fair split and also cover other benefits lost i.e. life insurance and death benefits.


  • Get specialist legal advice: Make sure you get some sound advice from a specialist like a Family Lawyer. Don’t be afraid to speak to more than one to compare and contrast the advice they can offer, until you are sure that you have the right Lawyer for you. A good Lawyer will ensure you receive fair value of any pension assets, as they will really understand the value of that pension.


  • Find a Chartered Financial Planner: There are lots of Financial Planners out there so it’s important that you find one that is offering you up-to-date, professional and independent advice, as well as providing you with an overview of your options so that you can understand the process and decide your preferred way forward. Make sure your Chartered Financial Planner takes time to understand what you need financially and personally, and that he/she can offer comprehensive advice in conjunction with key areas such as Estate/Inheritance Tax Planning.


  • Be realistic about risk: You need to know if you require an immediate income from the pension, (if your age allows you to receive one), and if so, what is the best way of providing the income. For example, is it a lifetime annuity or some form of pension income drawdown? If you don’t need an immediate income, then what type of pension should you hold your funds in, and what type of investment strategy should you adopt for your underlying funds? If you have other sources of income in your retirement, then you may be able to take a little more risk, if not, you may want to stay cautious. Whatever route you take, you need to be sure it suits your personality and your circumstances.

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