Couples going through a divorce should not disregard pensions in favour of trying to retain the value of the family home.
Those going through a marriage breakdown are being urged to recognise the importance of claiming a share of their partner’s pension as well as splitting the value of their property.
In a lot of cases people don’t seem to value pensions in the way they should do because they’re not focused on their long-term future and prefer to have the house.
But as part of divorce proceedings, pension funds can be shared. Even when made aware of this information, many people still often prefer the house as they believe it is the most lucrative option.
And only when they approach retirement do they realise they have missed out on a significant retirement income.
And having a smaller pension than your partner does not necessarily mean you will come off worse in the event of a split.
In most cases, unsurprisingly, the higher earner will have a bigger pension pot than the main care giver.
This can be because the parent who has undertaken the majority of maternity or paternity leave will have had gaps in their career to raise children. If there is a big disparity between the two parties’ pensions, the courts will often try and even this out when dividing pensions during divorce proceedings.
Ultimately though, courts look for fairness for the future and will benefit whoever in the relationship is financially weaker, which in our experiences tends to be the parent undertaking the majority of care for the children.
When it comes to dividing pensions, courts do not have to take into consideration future earnings and need only divide the sum as it stands at the time.
The process starts with a look at the capital value of both parties’ pensions. If a couple are approaching, or are over, 50 the court can also be asked to consider the income value of the pensions and divide with reference to this rather than capital value.
As it stands though, this legislation does not apply to cohabiting couples.
In cohabiting relationships people often don’t understand that they can’t claim for pensions. The matrimonial claims do not exist, meaning cohabitees have no opportunity to boost their pension funds irrespective of the length of their relationship.
More than three million unmarried couples choose to live together and cohabitation remains the fastest growing family type in the UK.
With increasing numbers of couples cohabiting, there could be a consequential effect of this in generations to come, meaning people should be even more focused now on their financial future and pension planning.
Everyone should regularly review their pension options and a ‘health check’ with a financial advisor is always sensible.
If you are facing separation or divorce, recognise the benefit of financial advice as much as legal advice and consider each asset individually to work out what you might need now – and in the future.
About Matthew Clemence
Matthew qualified as a solicitor in 2001 following completion of his training at a prominent law firm in East London.
Matthew originally joined Prettys in 2003 before leaving to head up the family law team in a firm based in Newmarket in 2009.
Matthew has now re-joined Prettys as a Senior Associate bringing with him a wealth of experience to the family law team.
Notably, Matthew was the husband’s solicitor in the Wright case which received worldwide publicity following the decision passed down by The Court of Appeal involving spousal maintenance, the result of which has dramatically changed the legal landscape in this area of law.
Consequently Matthew now receives instruction from clients both in the UK and abroad seeking advice in this particular area.
In addition, Matthew advises clients on all issues arising from family matters, including divorce, financial resolution, children disputes, pre/post marital agreements as well as financial resolution with cross jurisdictional elements, businesses, trusts and land.
Matthew is collaboratively trained and a member of Resolution. He is committed to resolving all family matters outside court wherever possible.
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