Pensions & Divorce: The Definitive Guide
Step 5: Arriving at a Decision
Exploring All Options to Reach a Fair Resolution
When going through a divorce, pensions are often one of the most valuable and complex assets to consider.
Once information has been gathered, and options understood, it’s crucial to ensure you make a fair and informed decision.
What happens once all the information is gathered?
Once all necessary financial details, such as pension reports and mortgage capacity assessments, have been gathered and exchanged, the next step is determining how the assets will be divided to meet the needs and goals of both parties. You may be resolving the financial settlement through mediation, collaborative discussions, or the court process.
What if an agreement cannot be reached?
If a mutual financial agreement cannot be achieved, court proceedings may need to be initiated, where a judge will make the final decision. It’s highly advisable to seek legal advice to fully understand the implications, including costs and potential delays.
Are pensions considered separately from other finances?
No, pensions are part of the overall marital assets and are generally not handled in isolation. They can be addressed through offsetting, attachment, or sharing, as part of the financial settlement.
What documentation is required to split the pensions?
Regardless of whether the resolution comes through mediation, collaborative practice, arbitration, or court, it’s important to note that only a court order can formally divide pension assets through either a pension sharing order or a pension attachment order. This order must include the correct provisions, along with the relevant pension sharing or attachment annex(es). If you’re representing yourself or mediating, it may be helpful to consult a family lawyer to ensure the appropriate documents are prepared.
Will delays caused by my spouse affect ongoing pension contributions?
A pension sharing order becomes effective on the ‘Transfer Day,’ which occurs 28 days after the court order is issued, or on the date of the decree absolute, whichever is later. Any pension benefits earned after the Transfer Day will not be part of the settlement. However, it’s crucial to monitor the correct implementation of the order to ensure no delays impact the final division.
What should I do with the pension report?
If a pension report has been provided, it will likely present several options and factors to consider. You may benefit from consulting a pension specialist, such as one from MKC Professional Services, to:
- Clarify details of the report and answer any questions you may have (via meeting, phone, or video call)
- Discuss implementation options if necessary
- Develop a cash flow model to assess the overall impact of different settlement scenarios, covering aspects like pensions, savings, investments, housing, income (including maintenance), and life assurance needs.
What is a cash flow model?
A cash flow model helps you evaluate how future events may affect your financial settlement. It can consider various factors, such as:
- Potential downsizing of the family home (e.g., when children move out)
- Future employment income
- Expected pension income as retirement approaches
- Short-term financial goals like home improvements or replacing a car
- Adjusting pension withdrawal timing
- Possible inheritances
What other issues should I consider?
Though this guide focuses on pensions, other financial aspects may also need attention, including:
- Capital gains tax
- Changes to trusts
- Life assurance policy transfers or the need for new policies to secure income streams in case of death or illness
- Mortgage adjustments
Once an agreement has been reached, the next step is ensuring its proper implementation.
