pension and divorce

stevew48 · 27 December 2008 at 12:37PM

Hi,

Not sure in this is the right area for this topic.
My wife and I are soon to get divorced after 25 yrs marriage. We are amicable and hope to get the divorce finanaces sorted with the minimum of fuss. I have agree to give her spousal maintenance and she is also having half the equity in the house.

But what about the pensions?

I know that my wife is entitled to a propotion of my pension and vice versa but we may have another solution, the question is what is best for her. I want to treat her fairly.

She has a civil service/police pension which she paid into for7 yrs and the latest statement quoted £1600 per year at retirement (index linked). I have done 11 yrs in the teachers pension scheme and my last statement gave a figure of £5200 per year. I am 53 my wife is 45. I also have an RAF pension but that is pension in payment and I am giving her all that and more as part of the spousal maintenance.

The other solution is to offset our pensions(her civil service and my Teachers) against a future inheritance. My wife is the sole heir to her elderly parents estate current estimate about £180K. We have always agreed, and still do, that the inheritance would be equally split. However I have suggested that she could take virtually all the inheritance and we leave our pensions for ourselves. I know that she could do pension sharing with me and then refuse to give me any of the inheritance. However she has agreed that if we pension share we will have a clause in our divorce consent order about the inheritance split. MY FIL is in a care home fully funded by PCT under section 117 and we know that if MIL went into care then some of the estate would possible have to pay for her fees (i have asked a question about this in silver savers 'care home fees').
So what are the choices?

Stevew

margaretclare · 27 December 2008 at 1:04PM

You don't mention kids, or whether your wife has a full-time career or not, but why are you planning on paying her 'spousal maintenance'?

Isn't this idea a bit 'last century' (or the century before that)?

Do women really expect to be 'maintained' for ever, nowadays?

Why not go for a 'clean break'?

Valli · 27 December 2008 at 1:49PM

Hi
My ex and I went to court about a year ago. We each had to get a statement from our pension provider for a cash amount now...then the court took it into consideration. We each ended up keeping our own pensions.
We also had to declare whether we could expect to inherit anything. Really you need to see a solicitor - but we also went for mediation in order to sort things out. Basically you both need to show what you have and take it from there and this can all be done in mediation.
If there are no kids and she is working and you are chances are the court/mediation would suggest clean break as has been suggested.

Errata · 27 December 2008 at 4:05PM

You can't use a speculative future inheritance in a divorce financial settlement. Only things which exist - pensions/property/cash/shares/other assets - can be assessed are taken into account.

Schnorbitz_2 · 27 December 2008 at 4:32PM

Hello. I hope the divorce procedures don't prove too traumatic for you and your wife.

What normally happens with final salary schemes is that the pension provider or administrator works out a "cash equivalent transfer value". This is the amount of money which you could take out of the scheme should you want to transfer out to another scheme or personal pension plan. Obviously, this amount will be larger the more pension you have earned while working, but it will also be larger the closer you are to retiring (as there are fewer years in which investments will grow until you retire).

The court will look at the relative transfer values of your final salary pension and your wife's final salary pension, and add them to your individual assets and work out how they are to be split up. As you both have final salary pensions to support yourselves, it may well be the case that you both end up keeping your own pension entitlements (as was the case for Valli above).

However, there are other situations that can occur. The court may rule that one spouse may be due a pension that is a certain fraction of the worth of the other. For example, the court may rule that the spouse will have a pension of 50% of the value of the overall pension, while the original member gets half of the original pension. The actuaries will then work out the amount of pension the spouse is then due: as a wife may well be a few years younger than the husband, it may be the case that there are a few years more until she retires for investment returns to grow, so she may ultimately receive a pension that's bigger than 50% of the husband's.

Alternatively the spouse may choose to transfer their half of the pension out of the scheme, so half of this transfer value may be taken to their own personal pension fund. If the original pension scheme is not fully funded, then that transfer value could be reduced.

stevew48 · 27 December 2008 at 11:32PM

Thanks all,

The problem with a clean break is the amount of equity I think that I would require. We do have a daughter . However, she is 22 but still lives in the family home with me. I really do not wish to sell the house and I can afford the large mortgage increase. I thought that as long as we agreed our finances and the judge thought it to be reasonable then that would be okay. i.e making sure that my wife was not a burden on the state. By the way my wife is in full time employment she earns about 16k I earn about £48K (with my RAF pension) hence the spousal maintenance.

Steve W

lrr_2 · 28 December 2008 at 12:19AM

I divorced my husband this year - clean break. I didnt want anything from him and him from me. We both have pensions. No money was ever discussed in the divorce, only that I had got sole custody of our daughter that he didn't contest. I kept the matrimonial home that was in my name only and he didn't pay anything on a home improvement loan. This way he walked away with no debt - this was a verbal agreement. In hindsight this could have went wrong and should have been a written agreement. Money is only an issue if someone wants it.

sorted_2 · 30 December 2008 at 11:09AM

Sorry about your divorce, good luck to you.
I got divorced after 35 yrs, 2 grown up children, who are not taken into consideration when older by the courts.
My x wanted an amicable split, so he said, until I was told I could have half his pension, then the fireworks started,
All I asked for was half of everything, he thought I was'nt entitled.
The courts gave me 3/4 of the house and half of the pensions, plus I had a small one which I was allowed to keep, I asked for a complete break and it was the best thing I did,
Think before doing anything and get it in writting.
Best of luck.

pension and divorce

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