Divorce - Financial Settlement 19 August 2021 at 9:16AM in Marriage, relationships & families 28 replies 2.6K views

PompeyPete

I'd be grateful for a bit of help and advice please.

THE SCENE.

I left my wife just over 2 years ago, and immediately entered a new relationship.

Since separating my wife has continued to live in the marital house.  The house is in joint names, there is no mortgage, it's fully paid for.

There are no financial debts, and our 3 children are grown up.

The money we had in savings [c£190k] was split down the middle.

I pay her 50% of my pensions each month, her share being approx £920 nett per month.

My estranged wife doesn't work, and has no other income other than the £920 mentioned above.

She will begin to receive her State Pension in just under 2 years time.

MY SITUATION.

My new partner and I bought and live in a Lodge [large static caravan] when we left our spouses.  The cost was split 50/50, so we are joint owners, and split the major costs involved [pitch rental, gas. electric etc].

We both have mirror wills with our estranged spouses, which we need to review particularly regarding protecting ownership of the Lodge should one of us die.

THE FUTURE.

My partner and I both want to move on, ie get a Divorce.

PROPOSED DIVORCE SETTLEMENT.

I would like the Divorce, and divorce settlement to take effect in July 2023, when she starts receiving her State Pension

I would like to make the settlement simple and as fair as I can.

I would like to offer my estranged wife full ownership of the house.  It's worth approx £300k.  The time between now and July 2023 should be sufficient for her to decide on whether she wants to continue living in the house, or downsizing to an easier to manage property

In exchange for giving her full ownership of the house, I want to be sole benefactor of my pensions.  That is approx £1830 nett per month, instead of 50%.

Should I put my offer to my estranged wife in writing, and try to get an agreement with her on the settlement in writing before applying for a Divorce?

COMMENTS REQUESTED.

Taking into account THE SCENE, MY SITUATION, and THE FUTURE, does my PROPOSED DIVORCE SETTLEMENT look fair, or am I missing something or being naive?  Many thanks in advance.

TBagpuss

It's difficult because you are effectively looking to swap income for capital. 

She would be giving up income of £920 a month, or £11,040 a year.

One question is what your pension fund if worth - how much would she need to 'buy' a pension that would pay her £11,000 (net) a year.

I am not a pensions experts and pensions values are complex, but I suspect that to replace that, he's need a lot more than the £150,000 you'd be offering her. 

It's also relevant to consider things such as how long the two of you have been married, and how old you each are. 

Obviously there is nothing to stop you making a suggestion to her but assuming that she gets some advice, she's likely to come back needing more information from you before she can respond. 

It would also be relevant to look at what other assets you each have, whether both of you get (or will get) the same amount in state pension, and your needs. IF you are with a partner and she isn't, then her needs may be greater than yours so a 50/50 share isn't automatically fair.

itsanne

TBagpuss said:

One question is what your pension fund if worth - how much would she need to 'buy' a pension that would pay her £11,000 (net) a year.

I am not a pensions experts and pensions values are complex, but I suspect that to replace that, he's need a lot more than the £150,000 you'd be offering her. 

PompeyPete suggests offering her the whole value of the house, ie £300,000, not £150,000.

PompeyPete

TBagpuss said:

It's difficult because you are effectively looking to swap income for capital. 

She would be giving up income of £920 a month, or £11,040 a year.

-  So far my estranged wife has had in cash 50% of our savings, her share being approx £95,000.

-  Since separating she has received each month 50% of my pensions.  These are my State Pension, Armed Forces Pension, and  Civil Service Pension.  The monthly amount she gets is £920*.

-  In July 2023 she will receive her State Pension.  She doesn't pay income tax, and will receive her pension in full, say approx £800 per month.

- If I do nothing, then her State Pension will be added to the 'Pot', and be shared 50/50.  So instead of receiving 920* per month she will get £920* + £400 = £1,320.  If she agrees with what I propose she will still receive her State Pension of £800 nett a month, plus she will have 100% ownership of the house.

One question is what your pension fund if worth - how much would she need to 'buy' a pension that would pay her £11,000 (net) a year. 

I am not a pensions experts and pensions values are complex, but I suspect that to replace that, he's need a lot more than the £150,000 you'd be offering her. 

- I'm offering her full, unfettered ownership of the house, ie. £300,000 [£150,000 + £150,000].

It's also relevant to consider things such as how long the two of you have been married, and how old you each are. 

- Up until our separation we'd been married for 43 years.  I'm 67 now, she is 64.

Obviously there is nothing to stop you making a suggestion to her but assuming that she gets some advice, she's likely to come back needing more information from you before she can respond. 

- Yep, I understand.

It would also be relevant to look at what other assets you each have, whether both of you get (or will get) the same amount in state pension, and your needs. IF you are with a partner and she isn't, then her needs may be greater than yours so a 50/50 share isn't automatically fair.

-  State Pensions covered above in bold text.  My needs and that of my estranged wife are basically the same.

-  I am with a new partner, who still works part-time. Her outgoings are modest but so is her income.

Thanks TBagpuss.  I'm not quite sure you've fully understood all I wrote in my opening post, so I've made comments above in bold.

Taking into account the notes I've made above in bold, the following is also relevant.....

- Until July 2023, when my estranged wife becomes eligible for her State Pension I DON'T propose any changes, ie. she will continue between now and then to receive £920* per month.

- In July 2023 her State Pension kicks in @ approx £800 nett per month.  This will be added to the 'pot', so she will receive 50% of it, giving her £920* + £400 totalling £1,320**.

- £1,320** is based on our current arrangement, ie. the house is jointly owned.

- In July 2023 my proposal is that.....

a.  Full ownership of the house is transferred to her.  She becomes 100% owner.
b.  She keeps 100% of her State Pension, ie. approx £800 per month.  In effect she will lose £120 per month from what she currently receives [£920 less £800], BUT, she will own 100% of the house.
c.  She also has the savings of £95,000.
d.  I keep 100% of my pensions, 1,840 [ie. £920*+ £920*], and whatever is left of my £95,000 savings.

I feel that what I want to propose to my estranged wife as a settlement is about as fair as I can get.  With her £95,000 savings, her State Pension of £9,,600 pa [12 x £800 nett per month], plus full ownership of a £300,000 house is very reasonable.

Anymore comments from anyone please?

TBagpuss

itsanne said:

TBagpuss said:

One question is what your pension fund if worth - how much would she need to 'buy' a pension that would pay her £11,000 (net) a year.

I am not a pensions experts and pensions values are complex, but I suspect that to replace that, he's need a lot more than the £150,000 you'd be offering her. 

PompeyPete suggests offering her the whole value of the house, ie £300,000, not £150,000.

The houses is a joint asset so you'd generally expect her to have 'her' half anyway. 

So he's only offering her 'his' half, worth£150,000 in exchange for her giving up her share of the pensions. 

The starting point is 50/50 on all assets, so it would be reasonable for her to retain half the house plus half the pensions. 

Her needs will probably be seen as a bit higher as she is single whereas he has a new partner so has someone with whom to share the outgoings, so there would be an argument that she should have a bit more than half. She's also a little younger so whatever she has is likely to have to last her longer. 

She may only need pension to provide her with £520 a month once her state pension kicks in , in order to equalise the pensions, but the issue is the same, the question is what level of capital is a reasonable exchange for that loss of income.

In addition, since these are Army and Civil Service pensions, they are presumably index linked and more secure than most private pensions. If you were looking to use capital to buy an annuity at that kind of level then she would need in the region of £225,000, for instance, so an extra £150,000 from the house may not be seen as fair. 

However, if she wants to keep the house and thinks she can comfortably live of her state pension alone, then there is nothing to stop her agreeing to a proposal on the lines suggested.

there are of course also other options: selling the house and splitting the finds unequally so she can buy a small property outright, and also splitting the pensions unequally, so she gets less than 50% of pensions but still has some additional income  - again, a pensions adviser could look into what share would be needed to enable her to have a similar level of income to what she has now, (e.g. around £120 a month to top up her state pension, if the estimate of £800 is correct for that) 
that would leave @PompeyPete with more than half of the current pension and some additional capital - there's no reason t has to be all or nothing either on the house or the pension.

Pollycat

Are you sure your wife's state pension will be £800 per month.
That's £184.62 per week.

PompeyPete

Pollycat said:

Are you sure your wife's state pension will be £800 per month.
That's £184.62 per week.

This is what I wrote earlier in the thread.....

-  In July 2023 she will receive her State Pension.  She doesn't pay income tax, and will receive her pension in full, say approx £800 per month.

.....I imagine that by the time she starts receiving her State Pension £800 nett a month will be fairly close.

Pollycat

I did read that.
You said your wife doesn't work.
You haven't said what working history she has.
Does she have a full NI record?

Has she asked for a state pension forecast?

PompeyPete

TBagpuss said:

itsanne said:

TBagpuss said:

One question is what your pension fund if worth - how much would she need to 'buy' a pension that would pay her £11,000 (net) a year.

I am not a pensions experts and pensions values are complex, but I suspect that to replace that, he's need a lot more than the £150,000 you'd be offering her. 

PompeyPete suggests offering her the whole value of the house, ie £300,000, not £150,000.

The houses is a joint asset so you'd generally expect her to have 'her' half anyway. 

So he's only offering her 'his' half, worth£150,000 in exchange for her giving up her share of the pensions. 

The starting point is 50/50 on all assets, so it would be reasonable for her to retain half the house plus half the pensions. 

Her needs will probably be seen as a bit higher as she is single whereas he has a new partner so has someone with whom to share the outgoings, so there would be an argument that she should have a bit more than half. She's also a little younger so whatever she has is likely to have to last her longer. 

She may only need pension to provide her with £520 a month once her state pension kicks in , in order to equalise the pensions, but the issue is the same, the question is what level of capital is a reasonable exchange for that loss of income.

In addition, since these are Army and Civil Service pensions, they are presumably index linked and more secure than most private pensions. If you were looking to use capital to buy an annuity at that kind of level then she would need in the region of £225,000, for instance, so an extra £150,000 from the house may not be seen as fair. 

However, if she wants to keep the house and thinks she can comfortably live of her state pension alone, then there is nothing to stop her agreeing to a proposal on the lines suggested.

there are of course also other options: selling the house and splitting the finds unequally so she can buy a small property outright, and also splitting the pensions unequally, so she gets less than 50% of pensions but still has some additional income  - again, a pensions adviser could look into what share would be needed to enable her to have a similar level of income to what she has now, (e.g. around £120 a month to top up her state pension, if the estimate of £800 is correct for that) 
that would leave @PompeyPete with more than half of the current pension and some additional capital - there's no reason t has to be all or nothing either on the house or the pension.

Thanks TBagpuss for all that......plenty for me to think about.

PompeyPete

Pollycat said:

I did read that.
You said your wife doesn't work.
You haven't said what working history she has.
Does she have a full NI record?

Has she asked for a state pension forecast?

If you mean has she paid in to cover gaps in the NI contributions, the answer is Yes.  So far as I'm aware she will receive the full State Pension.  Has she asked for a State Pension Forecast?  Tbh I don't know.

Pollycat

PompeyPete said:

Pollycat said:

I did read that.
You said your wife doesn't work.
You haven't said what working history she has.
Does she have a full NI record?

Has she asked for a state pension forecast?

If you mean has she paid in to cover gaps in the NI contributions, the answer is Yes.  So far as I'm aware she will receive the full State Pension.  Has she asked for a State Pension Forecast?  Tbh I don't know.

Yes, that's what I meant by full NI record.
I asked because you said she wasn't working now and not all people do get a full state pension.

I didn't think it would be fair of you to assume what her pension would be without knowing as you are asking her to make a very important financial decision.