Pension and divorce

enthusiasticsaver

My brother in law is divorcing my sister after 29 years of marriage. They have 2 adult children in twenties both still living in family home with my sister in GLC area.

He has a good pension in civil service at high grade. He is 51 or 52. She has NHS pension but worked many years part time and only just returned to full time work. She is 54.

They are working out settlement between them and seem to have agreed he will accept £60k or £70k as a deposit towards a new property for him in another part of the country. She will pay him out with savings gifted to her by my mum who has been very generous. That would leave her with the family home worth £700k with no mortgage.

If she accepts 90% of the family home and gifts him 10% in cash from her savings which £70k would be (no mortgage) does that mean she should relinquish her rights on his pension? There has been no mention of that from him and I am anxious she will struggle in retirement as even downsizing once the children have gone which could be sometime will not release a lot of equity given London house prices. As she works in that area and likes it she will not want to move out.

Any advice on what she should be asking for from him? I think she should get figures showing his benefits accrued so far but she is fairly uninformed about pensions and seems to think it is not an important asset. They are doing a DIY divorce which I again think is a mistake without advice given the length of the marriage, the fact that she put in a lot of money to the house gifted by my mum and is a much lower earner than my brother in law. I am trying to get her to see she should not ignore his pension.

happyandcontented

She should definitely not ignore his pension. She definitely needs a solicitor.

As a CS he will have an index-linked Final Salary pension the transfer value of which will probably be worth hundreds of thousands. He could also have been paying additional contributions to it.

Having a 700k house is indicative of his salary and his pension will reflect that salary.

enthusiasticsaver

I agree although I would say that the house value is partly because my sister paid for tens of thousands of pounds worth of extensions and improvements and because over the last twenty years in London property prices have gone up so much. I think he may be on around £70k salary. I am going to try and persuade her to at least get some figures from him re the pension as she seems to be only focusing on the house.

kb92830

I agree, she should not ignore his pension but equally he should not expect such a small sum from other equity sources. Unless there are other circumstances you have not divulged most divorces start at a 50 50 split of all assets. He could argue she should leave his pension if he is effectively ignoring 700k of property equity.

Ideally all assets should be assessed for value, a 50 50 split made and a balance found from there

enthusiasticsaver

kb92830 wrote: »

I agree, she should not ignore his pension but equally he should not expect such a small sum from other equity sources. Unless there are other circumstances you have not divulged most divorces start at a 50 50 split of all assets. He could argue she should leave his pension if he is effectively ignoring 700k of property equity.

Ideally all assets should be assessed for value, a 50 50 split made and a balance found from there

I think there are other circumstances as below.

I think it is difficult to assess a split of 50/50as over the years my mum has gifted around £200k to my sister, some of which she still has as savings but the remainder paid off the mortgage and paid for extensions. My sister also sacrificed her career basically so he could do his and rise up in the ranks. As they had children that is common, in fact my husband and I had the same issue and that means my brother in law earns three times what my sister does even though they both now work full time. That means his pension is also worth three times as much as hers if not more. He has worked for the civil service since 18 and is now 52 so 34 years. In all likelihood he will carry on doing this but is considering moving up North so his salary may reduce. I think his pension would be worth as much at least as the property if you took the CETV. He is accepting a lower share as he wants it now to start again and does not want to force her out because of the children. He also recognises the lump sums she put in. They had a relatively low mortgage as bought years ago so most of his monthly income went on holidays/general living and not on the house which he shows no interest in.

There also is the issue of the adult children which I think is why my brother in law is happy to take a smaller amount of equity as he does not want them to be thrown out given the price of London property. Equally he wants to buy another property now while he still has time to take out a mortgage and start again.

I have been telling her to increase pension contributions now while she still has 10 years left of her working life and that would help but I cannot help but think that her pension alone will not allow her to keep the house which she wants to do in retirement.

hyubh

enthusiasticsaver wrote: »

I have been telling her to increase pension contributions now while she still has 10 years left of her working life and that would help but I cannot help but think that her pension alone will not allow her to keep the house which she wants to do in retirement.

His pension needs to be considered, but so does hers - in other words, a divorce CETV should be requested from both schemes. The normal way a pension is split in a public sector scheme is for the ex-spouse to get their own special 'pension credit' membership in the scheme, with the original member's pension being reduced in step. If she did get a share of his pension, then, it would be on a DB basis similar to her own NHS pension (very valuable but inflexible at the same time).

By the way - I wouldn't dismiss the value of her NHS pension from the point of view of when she retires either. With over a decade to go to SPA, she will also be on target for a full state pension under the single tier system.

enthusiasticsaver

hyubh wrote: »

His pension needs to be considered, but so does hers - in other words, a divorce CETV should be requested from both schemes. The normal way a pension is split in a public sector scheme is for the ex-spouse to get their own special 'pension credit' membership in the scheme, with the original member's pension being reduced in step. If she did get a share of his pension, then, it would be on a DB basis similar to her own NHS pension (very valuable but inflexible at the same time).

By the way - I wouldn't dismiss the value of her NHS pension from the point of view of when she retires either. With over a decade to go to SPA, she will also be on target for a full state pension under the single tier system.

That is useful to know about the pension credit membership. He is younger than she is so by the time he retires she will be almost 70. Do they both have to be taken at the same time as this is her biggest worry?

She has worked for the NHS part time for about 10 years and only gone full time last year in a higher grade. I have said that her pension will also be taken into account so she should get figures and ask him to do the same. I did not know there was such a thing as a divorce CETV so that is useful to know.

Thrugelmir

enthusiasticsaver wrote: »

They are working out settlement between them and seem to have agreed he will accept £60k or £70k as a deposit towards a new property for him in another part of the country. She will pay him out with savings gifted to her by my mum who has been very generous. That would leave her with the family home worth £700k with no mortgage.

One assumes that the £630k is in lieu of the pension.

Her own NHS pension will have a value as well that needs to be offset.

Surely they are using a solicitor?

happyandcontented

enthusiasticsaver wrote: »

That is useful to know about the pension credit membership. He is younger than she is so by the time he retires she will be almost 70. Do they both have to be taken at the same time as this is her biggest worry?

She has worked for the NHS part time for about 10 years and only gone full time last year in a higher grade. I have said that her pension will also be taken into account so she should get figures and ask him to do the same. I did not know there was such a thing as a divorce CETV so that is useful to know.

On the CS pension website, there is a menu with that as the title!

http://www.civilservicepensionscheme.org.uk/members/deferred/information-for-deferred-members/

enthusiasticsaver

Thrugelmir wrote: »

One assumes that the £630k is in lieu of the pension.

Her own NHS pension will have a value as well that needs to be offset.

Surely they are using a solicitor?

They are not planning on using a solicitor but I think they should. I am going to recommend they use financial mediation. They say there are doing it by filling out an online form saying how assets are to be split. I think there is something on the gov.uk site. They are trying to keep costs down as they think they can come to an agreement.

He has worked for the civil service for more than 34 years and earns in excess of £70k

She has worked for the NHS part time for 10 years (various little freelance jobs before that with no pension) and is now working full time. Her salary will be much lower than his - probably around £25k now.

There is a large differential between both incomes and therefore pensions.

He wants a lower share of the property as he knows she can get that amount of cash (£70K) out of her remaining inheritance and he wants to buy a property of his own now while he has time to get another mortgage given his age. She is not in a position to sell and release any equity as the adult children still live at home so downsizing now is not an option. He does not want to force the children out of the family home.

He is also foregoing the £150k from his share that her inheritance/family gift was used to extend and pay off the mortgage.

Silvertabby

enthusiasticsaver wrote: »

That is useful to know about the pension credit membership. He is younger than she is so by the time he retires she will be almost 70. Do they both have to be taken at the same time as this is her biggest worry?

She has worked for the NHS part time for about 10 years and only gone full time last year in a higher grade. I have said that her pension will also be taken into account so she should get figures and ask him to do the same. I did not know there was such a thing as a divorce CETV so that is useful to know.

1. No. Once a pension credit record has been set up in her name it will be payable from her State pension age (possibly earlier, but subject to an early payment reduction).

2. When asking for CETVs ensure that they specifically ask for CETVs for divorce purposes. If they just ask for CETVs full stop, they will be rejected on the grounds that both schemes are non-funded public sector and therefore can't be transferred out. A divorce CETV is a very different kettle of fish.