Divorce, Split Pension, Options

00nnewbe

Hi All,

WARNING - Convoluted story below - I appreciate anyone who takes the time to read and help untangle this.

I'l cut a long story short:

1. Mother in Law has been divorced

2. ex husband has to fork over half his pension to her

3. they have sold their house, she is set to receive 110k from the sell in a lump sum

4.She is a very un-organized individual and depressed and unmotivated to deal with this all.

5. this has lead to the ex-husband (regardless of Legality) withholding the sum of the house (which was in his name so the money from the sale of the property is sent to him) until she sets up a pension for him to transfer to.

6. - she is very poor and won't be able to pay in more than £20 every couple of months. and she has no pension of her own.

7. all options seem to involve a down payment and monthly contributions to the mortgage which isn't possible for her.

8. she is 54 years old.

9. she's living with me and my Partner until she can buy a house with the above money, I'd really like to sort this out so she can (politely) jog on ASAP.

Which is the best option to go for here? is a pension necessary in this situation or can she open a High interest savings account?

if pension is the right way, which one should she go for?

Optional questions which I could use help on:-

if she uses the lump sum to buy most of a house (houses in the aread are 130 - 150k) is it wize to use the pension money to complete the purchase of the house in full so she can save for 10-12 years retire at 67 and have no Mortgage to pay and 12 years worth of savings?

Truelly appreciate it, if you got to the end of this post. any help is a god send!

badmemory

I just thought I would say a few words whilst waiting for those who know better than me what to do. I am sure she cannot access the pension until she is 55. I hope the ex is withholding the money to push her into doing what has to be done re the pension. Of course you could be stuck with a 'lodger' until she is 55 to release the 25% lump sum - if that is possible, but that would not be a good way to go (maybe a small loan would be possible?). Will that be enough to cover the shortfall for the house purchase?

WillowCat

Your post is a little confusing, but I think the situation is this:

Your MIL has a divorce settlement of £110k lump sum, from the sale of the marital home and a 50% pension share of her ex husband's pension.

The lump sum has yet to be paid as her ex is using it as a 'lever' to get her to sort out the administration for the pension (as badmemory suggests).

She wishes to purchase a property but has a shortfall on the purchase price.

Assuming that the pension share is an external transfer into a money purchase scheme (as it sounds like from your post) then yes she needs to open a pension in order to receive the share. She cannot take it as cash directly, or put in any other asset type, it must be transferred into a recognised pension scheme.

She will then have a pension of her own, and she doesn't have to make any further contributions to it if she does not wish to.

Once transferred then she cannot access it until 55, at which point she has the option to take 25% tax free (or leave it to grow further). She could also at that point enter drawdown and take any further amount subject to tax. There are other options and I won't expand further.

Regarding the purchase of the house, is she working? Can she raise a mortgage?

She has a big deposit but if she has no job then I can't see that she could get a mortgage for the remainder.

You don't say how big the pension share is, but if she can't get a mortgage is the 25% tax free lump sum enough to make up the purchase price? She would have to wait until 55 to buy though.

00nnewbe

Thanks guys

@badmemory, unfortunatly her credit rating is shot to bits thanks to being bankrupt twice. So a loan is probably out of the question but a mortgage with a huge deposit however could be doable.

@ willow cat

Apologies if I was confusing with my synopsis. It's a very confusing and emotive issue at the moment for us.

She does have a job but I'm not sure of the pay, as she is a driving instructor and only declares so much income.

This is a further problem because she hasn't paid NI for years so her state pension will be non existent.

Ultimately she has to make it work with lump sum and pensions .

But the big question I really need help with is WHICH pension. With Who. And what type. I'm very confused by all the options.

Many thanks

xylophone

She can obtain a state pension statement which will show her starting amount for new state pension.

https://www.gov.uk/government/publications/application-for-a-state-pension-statement

An IFA could help with setting up a pension see http://www.thepfs.org/yourmoney/find-an-adviser/

http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/top-tips-for-your-pension/choosing-an-ifa

Would the £110000 be enough to buy a flat outright?

atush

She can open a pension online with cavendish online or HL. Both offer personal pensions. How much is her share of the pension?

A cash fund would be good for 25% of it (so it doesnt go down in the year while waiting to take her 25%). the rest could go into a Vanguard 40/60 or 60/40 fund .

It would be best if she made contributions to the pension ongoing of whatever amt she can. And while living with you, although I assume she will contribute to food/utilities, she should bank the rest of her salary to help her set up house next year.

Try to get her a credit repair CC, help her set up a DD to pay it each month, and try to help her get organized and get her back on track. Keep the card if you have to at first allowing only small purchases to be paid in full each month.

Mojisola

00nnewbe wrote: »

3. they have sold their house, she is set to receive 110k from the sell in a lump sum

5. this has lead to the ex-husband (regardless of Legality) withholding the sum of the house (which was in his name so the money from the sale of the property is sent to him) until she sets up a pension for him to transfer to.

Won't she need this money to buy somewhere to live?

He may be trying to save her from herself but he can't make her put that money into a pension.

00nnewbe

@mijisola she won't be putting that lump sum into a pension.

But she needs to sort out setting up a pension to receive half her ex pension before he releases the lump sum for her to do as she will with. (Hopefully buy a house)

atush

Read post 6 again perhaps? You can help her do it.