early retirement and divorce

Lonely_goatherd

Hi just wondered has anyone taken early retirement as they were going through a divorce?
How might pension sharing be affected?

I am 56 and want to retire in December at 57 .I have been married 33 yrs and it`s likely I will receive a share of my husband`s pension as I will only have had 17 yrs service to his 30 due to me being at home bringing up children.There are no capital or income issues to resolve,just pensions.

I would ideally be returning to work part- time afterwards as I still have a mortgage on the house I had to buy after separation.My workplace pension provider says I don`t have any restrictions on the amount I can earn before 60.

My husband may have to retire also due to ill health.

Any do`s or don`ts or pitfalls that are glaringly obvious that I haven`t seen?

Until my husband retires I will have a pension of about 7k before tax: if I decide not to work,and I used lump sum to pay of part of mortgage would I be entitled to anything from the state?

Thanks.

jamesd

In England and Wales the standard split starts out as each of you getting half of the pension accrued by the other while married.

Your individual circumstances modify that and if your are able to work but your husband isn't that may lead to an increase in the proportion going to him to meet his income needs, bearing in mind that inability to work. Your husband might in particular seek an increase to boost his income until his state pension starts given that he may be unable to work between now and then.

If your husband has to retire on a reduced pension due to ill health that could reduce the amount you would get from a defined benefit pension, like final salary. That would depend on whether you get it when he does at a reduced level or have to wait until the normal retirement age and end up getting the unreduced amount instead. It would have no effect on personal or defined contribution pots which just have a real market value at all times.

If you choose not to work you're mostly entitled to nothing from the state in the way of unemployment-related benefits because those require seeking work. Since you're not renting you wouldn't be entitled to Housing Benefit to help you as a person with a possibly low income with your rent. A plan to spend capital to reduce your capital below the savings limits for means tested benefits could also cause trouble if you tried to claim them, under the deprivation of capital rules. Choosing not to work when you can work will not increase your need-based split of assets in divorce, you don't get to just make the other person pay for a free choice that you make.

If you can afford to retire at 57 go for it. It's really up to you to ensure that if you retire you'll have enough to live on.

One common issue with retiring around your age is the delay until the state pension starts and boosts your income to its long term value. One workaround for this is an equity release mortgage that allows repayments and drawing money when you want it. This might let you both pay off the current mortgage and gradually draw money to boost your income until the state pension starts. Then with that higher income including the state pension you could choose to repay the mortgage if you wish. I'm assuming that you don't have any other significant amounts of money available. A lump sum of some sort from the divorce could be used instead if it's sufficient.

atush

The biggest pitfall is drawing pension early when you don't need it, thereby paying more tax than you need to.

Unless you put that pension income into new pension.

will your Tfls be enough to pay off your mtg?

Thrugelmir

A share of your ex's pot should be transferred to yourself as part of the financial consent order. .

mgdavid

are you retiring or reducing your hours to part-time?
Quite different.

Lonely_goatherd

Thank you for all the above advice.It`s all helping to put pieces of a jigsaw together -one where you don`t really have a picture of what it should look like when finished.

jamesd

There's a bit more to consider, perhaps. You bought a house during the separation time but do you actually need a house to live in and will it be suitable if your health gets worse in say twenty years? This is an interesting question because downsizing and/or moving to a cheaper area, even a cheaper part of the country, can free up significant amounts of money. A smaller place also means smaller bills, cutting your expenses. Those things and loss of mortgage payments, perhaps, can lead to you being able to retire earlier with fair comfort that gets better and completely predictable once your state pension starts.

Have you asked for your state pension forecast yet? If not, you should. You may be able to make a significant improvement in how much you get by buying some relatively cheap past years if you've been neither working nor receiving child benefit during some years.

These things aren't related directly to divorce, it's just that getting close to retiring is a good time to consider moving, while you can still easily deal with the physical hassles that come with it.