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DIY divorces risk pensions headaches in the future

22/10/2018

Married couples opting for DIY divorces risk ending up without any retirement income as they lose control of their finances, says Kate Rowley, a solicitor with FBC Manby Bowdler’s family team.

There has been a big rise in the number of people choosing to arrange their own divorces without involvement from a solicitor. 

Whilst this might be financially attractive in the short term, there is now a growing body of evidence which suggests the immediate savings are also storing up long-term – and costly – financial penalties, particularly with regards to pensions.

Divorcing couples can choose a number of ways to divide their pension assets, including “pension attachment orders” and “pension sharing orders”. 

Under a pension attachment order, the divorced spouse will receive a percentage of the monthly pension payment from their former spouse – a form of maintenance which prevents a clean financial break and can lead to considerable disadvantages to both the person with the pension and the person receiving a share.

A pension sharing order, however, divides the pension funds available at the time of separation leaving both parties with their own retirement funds, over which they have full and independent control. 

Latest figures show a 45 per cent rise in attachment orders between 2015 and 2017, from 2,993 to 4,223,  corresponding with the increase in the number of people seeking to divorce without legal help.

Whilst attachment orders are more straightforward to organise, they come with a host of hidden drawbacks which can lead to financial headaches in the future.

For example, if a spouse remarries they are no longer entitled to the payments. And even if they remain single, they have to wait for their former spouse to retire until they can claim any pension income, with no recourse to the courts available.

Added to that, the entitlement to any pension settlement ceases whenever the former spouse   dies, making financial security in retirement impossible to plan accurately. 

Despite being more complex to arrange – and requiring expert legal help – the pension sharing order offers divorcing couples real security, peace of mind and control over their financial wellbeing.

A pension sharing order means each party to a divorce is left in full control of their own finances, meaning they can each plan for their future in complete confidence without being at the mercy of their ex’s plans or health.

Pensions are often complicated and nuanced – and something many of us struggle to understand even at the best of times. There is a big difference between private pensions and public sector pension schemes for example. When we have so many other things on our minds – as divorcing couples do – it is vital to call on expert advice to make sure any decisions we make now are not just storing up trouble for the future.

If you would like any help or advice on family and divorce matters, Kate can be contacted on k.rowley@fbcmb.co.uk or 01952 211323

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