Pensions on separation or divorce

Jami74

I have been married for 20 years and we have 2 nearly adult children. Finances have always been tight, having started with absolutely nothing 20 years ago and working in minimum wage jobs. When our kids were young he worked full time and I worked part time (and looked after the kids) and we were supplemented with tax credits. Then I went to university and we both worked part time (and he looked after the kids). Now I work full time (and earn much more than minimum wage) and he still works part time. Before and after I went to university I tried to talk to him about training or learning a trade but he didn't think it was for him. Now the kids are independent I've tried talking to him about increasing his work hours but he doesn't want to.

We have very different attitudes to money. He believes you only live once so need to enjoy it, I prefer to budget and get the best value from money that I can. Things are ticking along okay at the moment financially. I pay for nearly everything and he makes a contribution of about half of his (small) wage and we're both happy with this arrangement. 

I am 20 years away from retirement and want very much to have enough in retirement to not be scrimping and scraping. I now work for the NHS so will get a pension from that, I will get state pension and I've just opened a SIPP which I am planning to contribute as much as I can into (probably £100 a month to start with). He has his employee (retail) pension which will be tiny given that he works part time on minimum wage and will get state pension. I keep trying to talk to him about retirement but he is not interested, thinks pensions are a con and says he can't afford to contribute even £50 a month more. He will reach state pension age nearly ten years before me but expects to have to carry on working. 

We never got on the property ladder. Simply never managed to get a deposit together. On the plus side we have no debt. I've just read something on another thread that made me wonder if we separated or divorced would I have to share my pensions with my husband? It seems a bit unfair if I am saving/investing my spare pennies while he is spending his spare pennies.

comeandgo

Yes you do have to share your pension, the same as any “ husband” of a stay at home wife does.

Keep_pedalling

Forget state pensions, you would not have to share that. It sounds like neither of you currently have much in the way of other pensions, and your your husband’s earlier full time job may actually put him ahead of you.

The pensions of both of you could be taken into account but if you have pensions of equal value then they will be left alone. If one of you has a higher pension provision than the other some will get allocated to the worse off ex, but only for the pension built up while you were married. Your potential 20 years of ongoing NHS pension would be 100% yours. 

Pollycat

Keep_pedalling said:

Forget state pensions, you would not have to share that. It sounds like neither of you currently have much in the way of other pensions, and your your husband’s earlier full time job may actually put him ahead of you.

The pensions of both of you could be taken into account but if you have pensions of equal value then they will be left alone. If one of you has a higher pension provision than the other some will get allocated to the worse off ex, but only for the pension built up while you were married. Your potential 20 years of ongoing NHS pension would be 100% yours. 

My friend lived with her now ex for quite a few years before they were married.
Their pensions from the start of the relationship - not marriage - were taken into account when splitting them.

Sandtree

Jami74 said:
if we separated or divorced would I have to share my pensions with my husband? It seems a bit unfair if I am saving/investing my spare pennies while he is spending his spare pennies.

The starting position for marriage is still assumed to be a 50/50 partnership. As such if you were not to separate it'd be assumed that the two private pensions will be joint household income and that you wouldn't be leaving him to starve because he didn't make sufficient provisions.

As such the current value of the pot gets considered part of the marital assets, assuming it wasn't significant before the start of the relationship started.  It ultimately however is the same as any other asset, you dont have to share it and you can settle it with them getting more of the houses value etc.

With my short time in Pensions, the courts request a pension valuation as the first step in a pension sharing order and subsequently will instruct the percentage to be transferred... probably less than 25% of court requests turned into PSOs and unless large numbers discontinue their divorce when realising the sums its more likely that people prefer giving away cash now than carve up their pensions. 

TBagpuss

Yes., he would potentially have a claim against your pensions.

If you are currently planning to separate, then bite the bullet and move forward with it.

IF not, consider whether he would be open to discussing your differing financial approaches and thinking about a post-nuptial agreement. 

Just as with pre-nups, post-nups are not legally enforceable but a court in any later divorce can take them into account, so if you have an agreement that (for instance) expressly states that you have chosen to keep your personal finances separate and that you accept that you have different priorities and have made different lifestyle choices, and as such agree that neither will claim against the other's pensions on divorce, then a court would be entitled to take that into account.  You could also agree that any pensions built you during a specific period (perhaps from the date of your first child's birth to the younger child turning14 or so) will be split but neither will make any claim on any pension the other builds up after that - this would reflect the fact  that you are both now in a position to work full time and build up pensions but are choosing to keep your financial plans and choices about work versus retirement plans separate. 

It's particularly relevant that while each of you has spent some time working part time in order to care for your children, you're now at a point where he is working part time by choice. Does he do more of the housework, cooking etc ? 

It might also be worth you having some conversation with him about how he sees things working in the future - for instance, when you retire, will he be willing to split outgoings more equally? Will he have any issue with you travelling or otherwise enjoying your retirement, if he is still working part time? Or will b he expect you to pay for him to go with you on holidays etc if he can't afford to pay his way? I don't think that there is a right or a wrong answer , but it's worth having the conversation - it sounds as though at the moment you are effectively subsiding his choice to worker part  time, by paying a higher share of the outgoings. - this affects you ability to have towards your retirement or indeed to look at cutting your own hours should you wish to do so.

It might be sensible to have a proper conversation with him and perhaps look at possible compromises. For instance, even if he doesn't want to work full time, would be be open to increasing his hours a bit , to put some money aside for holidays etc? 

Jami74

Thanks everyone for all your answers.

I keep trying to talk about retirement but he doesn't get it. I pointed out that he'd be in his seventies when I reach SPA and he said he doubted he'd live that long 

Separating now would not be financially sensible for either of us. I expect we'll stay together. 

Malthusian

Jami74 said:

Thanks everyone for all your answers.

I keep trying to talk about retirement but he doesn't get it. I pointed out that he'd be in his seventies when I reach SPA and he said he doubted he'd live that long 

If he's not already in poor health he's in denial. It's just a more socially acceptable way of saying "I don't care about the future". Or "My plan is to live off your pension."

Does he need pension savings if he's currently living on a low part time income and plans to continue doing so until at least State Pension age? That suggests that State Pension may be enough to replace working income.

Have you looked at buying "added years" in the NHS scheme rather than paying into a SIPP?

Jami74

Malthusian said:

Have you looked at buying "added years" in the NHS scheme rather than paying into a SIPP?

I have, thanks.
I am a little undecided about the best way forward and keep going round in circles.
67 feels so far off and I'm struggling to imagine having to work that long. If I pay into a SIPP then it gives me options on cutting down before then. But also, we do not own a home. I am wondering if I could gather a deposit (circa £30k) in the next five or so years and use it to get a 15 year mortgage to buy a home to retire in. The mortgage repayments would be high but the kids will have left and I think the not paying rent and not saving like made would cover them. If we didn't have to pay rent in retirement we could live on far less.

Malthusian

With high repayments due to the short mortgage term you may struggle to qualify on affordability grounds. I'm not trying to put you off when I've no idea of your income and how much you would be looking to raise, but it might be worth talking to a mortgage broker just to get a feel of whether it would be possible.

Mortgages can last beyond your retirement date providing the lender can establish that you could still cover the payments in retirement. So you might be able to push the term past 15 years, especially as you are in the NHS pension scheme.

With the NHS pension there is the option of drawing it early with a penalty - but a SIPP can be drawn from 57 (in your case) without penalty so it is a balancing act.

Jami74

Malthusian said:

So you might be able to push the term past 15 years, especially as you are in the NHS pension scheme.

Ooh I didn't know that. At the moment, if I carry on working in the same role I am in now until 67, then NHS pension + state pension would just about cover current outgoings in todays money. (Assuming that I would not be paying pension, NI, student loan or feeding two teenagers). 

So far my thought process is to either a) find a way to buy a home even if it means scrimping and scraping, then live a comfortable retirement not having to pay rent b) throw as much money into a SIPP as I can so I can retire a year or two before SPA (and NHS pension age) continuing as I am or c) overpay into NHS pension so I can afford rent plus a few luxuries in retirement but be committed to working until 67.

I thought if I put extra money into a SIPP or even just S&S ISA then I might be in a position to buy at some point in the next ten years but if not then I'd still have the option of either retiring a bit before age 67 or not but having a bit of extra money for retirement on top of rent.