Splitting pensions after divorce.

letspretendforaminute

My wife has £175k in her SIPP and I have £22.5k in mine. We are divorcing (NISI going through the courts now), would it be possible to transfer mine into hers via the financial order and receive spousal maintenance of say £750p/month uprated in line with the RPI indefinitely and for me to then change the beneficiary of any inheritance I might receive (anticipated to be £160k-£175k) to my now ex-wife who'll get the higher rate tax relief (six figure salary) and once this has gone through apply for a clean break order and take a percentage of pension assets (33% of £750k-800k) in 9 years when our children have left school and I'm 50y/old? The divorce is amicable.

letspretendforaminute

The inheritance will be altered by deed of variation or letter to that effect.

Brynsam

Probably not, but the person you need to ask is your solicitor. She can't use her SIPP to pay maintenance to you if that's what the plan is (assuming she's the same sort of age as you) - nor is it likely a court would order a transfer of all your SIPP assets to her SIPP.

letspretendforaminute

Maintenance would come from her salary, my inheritance (by way of variation) would paid into her SIPP then split through the clean break order. While the spirit of what I'm saying deviates from the norm surely it's technically possible if a court sees the same. The advantages are tax efficient and she'd get £40k+ back in her tax return dripping the money in (after the 3 year back dated rule is applied).

Tom99

[FONT=Verdana, sans-serif]Unlikely. I think the Judge is far more likely to apply a pension sharing order to your wife's pension, allocating say £76k of her pension to you so that you end up with the same amount in your pensions now.[/FONT]
[FONT=Verdana, sans-serif]Where does the pension worth £750k come in?[/FONT]

letspretendforaminute

The original plan was to split 50/50. I've already given her the house (no mortgage, paid for by myself from another inheritance). Honestly, this was to benefit her not me and if it's not an option I'll do as you've suggested anyway. The £750k+ is assuming 4.75% growth per annum compounding (SIPP £200k, Inheritance (in SIPP) £200k, additional work pensions £100k).

Dox

letspretendforaminute wrote: »

Maintenance would come from her salary, my inheritance (by way of variation) would paid into her SIPP then split through the clean break order. While the spirit of what I'm saying deviates from the norm surely it's technically possible if a court sees the same. The advantages are tax efficient and she'd get £40k+ back in her tax return dripping the money in (after the 3 year back dated rule is applied).

The court won't see its role as helping the parties to save on tax! There are also too many unknowns - an inheritance you might or might not receive; tax relief on pension contributions (especially for high earners) is a constant government target and may well only be at basic rate in a few years from now; and you are also assuming that she won't want to make - or indeed maximise - her pension contributions in the years leading up to your possible inheritance (you won't know which years those are until your 'prospect' turns up their toes).

It's hugely over-engineered for what might be a modest tax saving.

crv1963

Several flaws that I can see.


1) Divorce is a two part process- ending of the marriage, through a process that can be difficult or not, amicable or not, "the grounds for divorce" and then the splitting of the marital assets, first priority any children and ensuring their needs are met, then ensuring each party gets an equal share of the marital assets. The courts would not act in a way that meant they are knowingly used to reduce anyone's tax bill.
2) Having given your wife the marital home you may well be awarded a greater share of her pension to even things up especially if she earns a great deal more than you.
3) The courts will not take into account a potential inheritance- you might not get it for any number of reasons.
4) You have no better idea of pensions growth than anyone else, past performance is no guarantee of future returns remember it's stated on every savings product.
5) Either may get a different partner which could blow a torpedo through all of your plans.
6) You'll both be told that you need to sort finances out before the Degree Absolute that separates you financially from each other and cancels your current wills.


If the court suspects you are divorcing to save on tax they may inform HMRC and you may well be refused a divorce!

Olly56

Sorry to jump on this thread but I'm new to this.
I'm in the process of getting divorced and going through mediation the only sticking point is pensions we both have pensions but mine is worth £500k and hers is worth £125k the mediator as said she can claim 38% of my pension to make it equal there are no kids or anything else is it as easy as that. Hers is a NHS pension 15 Years and mine is a SIPs pension 40 years

Tom99

Olly56 wrote: »

Sorry to jump on this thread but I'm new to this.
I'm in the process of getting divorced and going through mediation the only sticking point is pensions we both have pensions but mine is worth £500k and hers is worth £125k the mediator as said she can claim 38% of my pension to make it equal there are no kids or anything else is it as easy as that. Hers is a NHS pension 15 Years and mine is a SIPs pension 40 years

[FONT=Verdana, sans-serif]If that's what you both agree then yes its easy to do. You just apply for a pension sharing order in that proportion.[/FONT]

Olly56

Thanks Tom99 the reason I'm asking is because when I told my solicitor her reaction was to say I needed professional financial advise but surly they would just say the same thing as the mediator and I could save myself £200