Divorce and Pension advice

BleepinHell

My partner was unable to obtain a divorce as her ex would not sign the papers. she was waiting the 5 years to be able to do it alone. however
Her 61 yr old ex has recently been in touch saying he wants to draw his works pension as a lump sum.
It seems he needs her to sign some documents to facilitate this.
Due to his past unreasonable behaviour she is reluctant to help him down this route. My question?
Is there any benefit for my partner to be had?
can she claim any of his pay-out?
Can he get his hands on his cash without her ok?
Property is involved can she insist he pays of the mortgage?

xylophone

https://www.moneyadviceservice.org.uk/en/articles/splitting-pensions-during-divorce

Your partner should see a solicitor?

jamesd

The starting point for a divorce is an even split of the values of each parties pensions that have accumulated during the marriage.

The effect on her depends in part on what type of works pension it is. If it is a pension that is based on salary, say 1/60th or 1/80th per year worked or any other final salary or average salary type, collectively called defined benefit, it is normally not possible to get the pension as a lump sum. This is because an independent financial adviser has to sign off on it as a good idea and it isn't normally going to be possible to do that unless ill health is involved. A value for this sort of pension would be calculated for divorce purposes as something called a CETV, the cash-equivalent transfer value, that can be used to compare other assets being shared in the divorce. Normally it is prohibited to take more than 25% as a lump sum.

However, for a pension that was paid into for only a short time it is possible to get it all as a lump sum if the total value of it and all other pensions except the state pensions is no more than £30,000. The first 25% is taken as a tax free lump sum, the rest is added to taxable income in the year in which it is taken, so will often be subject partly to higher rate tax.

The other type of works pension is defined contribution. These have a pot for each individual person and the ability to choose investments. These pots normally can be taken directly. There is no need to ask for a CETV, the value is whatever the value of the investments is. As with the other type it is normally prohibited to take more than 25% as a lump sum.

Except for the low value case, the penalty for exceeding the lump sum is a 55% tax charge from HMRC on the amount taken out. However, most pension companies will refuse to do this, with only scammers and fraudsters willing. Large warning bells are appropriate if the amounts involved are more than £30,000 and absoluter refusal to agree is likely to be the best route, to avoid a massive loss of money.

For both types there are two other cases where taking the whole amount as a lump sum in some ways can be possible without large penalties.

The first case is where a person has been diagnosed as having a medical condition which gives them a life expectancy of less than a year. In the defined contribution case the money is simply made available, all of it. In the defined benefit case, this is one of the situations where an IFA would be expected to agree to a transfer out of a defined benefit scheme into defined contribution scheme. However, with a spouse involved, the death benefits must be considered because those may be of greater value than the lump sum. this possibility is one where there could be a direct conflict of interest between the two of you, with one person wanting the money while alive and not caring about the loss to the other any more.

The second case is only applicable to defined benefits. For a person in less than normal good health it is possible that the money that can be taken as income from the defined benefit type will pay them more money than the works defined benefit pension would pay. So they may do this with the agreement of an IFA to improve their life while alive. As with the previous case there is a direct conflict of interest where there is a spouse who the person doing this no longer cares about, since the spouse with a longer life expectancy may get more in death benefits from the pension remaining where it is.

We can't really say much more without knowing a lot more about the type of pension, possible value and health situations of each person. However, it seems unlikely that it will be to your partner's benefit to do it. Not impossible, but so far no reason has been given that could make it in their best interest. So why is the spouse wanting to do it?

it would also be good for us to know what the documents are. A simple request for a CETV wouldn't be a problem. Authorising an IFA to investigate transfer or appointing an IFA would be a problem since it might actually authorise the transfer rather than just finding out the value.

For her own protection she might also want to contact the pension paying place directly to ensure that they are aware of her presence and to find out from them what they believe her entitlements are, and so that they know that there is a possibly unresolved divorce split to deal with and the potential for financial fraud from her spouse. Asking them to confirm all signed instructions from her by phoning her to check would also be useful protection against forgery.

In general it is most likely to be to her benefit to insist on this being done via divorce with complete use of proper divorce value calculations and either a pension sharing order or pension splitting order that will protect her interests.

If the divorce has already happened, the issue would probably be that she is entitled to some payment from the pension if she out-lives him. That would have a value that would need to be accounted for. Alternatively, there may be an order in place as a result of the divorce that requires the pension income to be shared with her or split and for this reason she would have to consent. It is unlikely to be to her advantage to agree in that case, if she was to do so she would also have to take action to ensure that she gets and appropriate proportion of the money based on what the divorce settlement said she should get.

What he can do without her signature depends on the pension type. If she's being asked it's probably because a firm has already refused to pay out without her explicit agreement. That in turn means that they probably also know that it would normally harm her interests.

This post has been mostly about the risks but there are potentially situations where ti could be to her benefit to agree, with some split. One might be a defined contribution work pension with a value below £30,000 being taken as a small pot lump sum. In such a case she would simply require that half of the money be paid to her. In that case there is no investment loss normally, so no great harm in agreeing. Even that can have cases where it is a bad idea, like when there is a guaranteed annuity value or other non-standard benefit. So while I don't want to write off all chance of it being to her benefit, the odds very strongly favour that case.

If we know more we might be able to say more but unless it is a low value situation the advice is likely to end up being consult an IFA and/or divorce solicitor. The IFA is the appropriate expert to work out what the gain or loss for her would be and to explain things, the solicitor to handle how to get what she's properly entitled to.

princeofpounds

I would be careful. Locked up in a scheme she knows where it is. Once it's out of the scheme he can 'spend' it.

I know nothing about divorce, but I am surprised he has 5 years to prepare his assets for a fight... I'm sure there are forums that might help with strategies to improve the chances things stay fair for that period.

TBagpuss

There is no need for her to wait 5 years., She should see a solicitor and start proceedings now, based on 'unreasonable behaviour'. It will then be entirely reasonable to refuse to sign anything relating to the pwension until the finances are sorted out, and if there is to be a pension sharing order, the order should be implemented *before* he daws any pension.

It is still possible to split a pension in payment, and of coruse any lump sum would also be part of the matrimonial assets and would fall to be taken into account, but it is generally much more expensive to split a pension in payment, so it makes sense for both of them to deal with any split first.

our partner should not agree to, or sign, anything, until she has taken proper legal advice.

BleepinHell

Thank you. It is a messy situation no doubt