Lend to my son

MallyGirl

Malthusian wrote: »

Divorce typically means you split the assets of the marriage. You may lose some of what was "yours" (although of course it wasn't "yours", it belonged to two people). It doesn't in itself mean you get into debt.

It can. A good friend ended up in serious debt due to buying out his ex wife's claim on future pensions. He figured it was better to get clear from her and go through the financial pain as soon as possible, with a view to a more comfortable retirement.

Malthusian

MallyGirl wrote: »

It can. A good friend ended up in serious debt due to buying out his ex wife's claim on future pensions. He figured it was better to get clear from her and go through the financial pain as soon as possible, with a view to a more comfortable retirement.

That would be very unlikely nowadays as it would be much easier to split the pensions via a Pension Sharing Order.

Someone might still borrow money in order to retain a valuable defined benefit pension, but it's unlikely they'd be able to get a big enough loan.

Your friend was only in net debt if you ignore the fact that his future pensions had a value. I know pensions can't be sold and don't have a value in the traditional sense. But a future income stream has a value which was almost certainly more than the amount he borrowed to pay off the ex.

Let's imagine I divorce and we share an unencumbered house worth £200,000 and no other assets. I want to keep the house so I borrow £100,000 on a mortgage and my ex spouse walks away with £100k in cash while I have a £200k house and a £100k debt. It makes no sense for me to go around saying "I'm £100,000 in debt because of my divorce". My net assets are £100k. Now imagine that instead of a house I have a future income stream from my pensions, and if I didn't have those pensions and wanted to buy that income stream on the open market, I'd need £200k. Nothing changes.