Divorce - Financial Settlement

PompeyPete

Pollycat said:

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.

I clearly said at the outset "She doesn't pay income tax, and will receive her pension in full, say approx £800 per month".  The only person assuming was you!

Pollycat

PompeyPete said:

Pollycat said:

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.

I clearly said at the outset "She doesn't pay income tax, and will receive her pension in full, say approx £800 per month".  The only person assuming was you!

I didn't make an assumption.
I said I didn't think it would be fair of you to assume what her pension would be without knowing.
A simple confirmation that she will get a full state pension would have been adequate.

I regret that my question has annoyed or irritated you.

Good luck with your financial settlement.
If you have that attitude with your ex wife to be, it might turn out to be a bumpy road.

AnnieB2018

In all honesty I wouldn’t agree to the hassle of maintaining a larger house + living just on state pension, or then downsizing and decorating her new place all afresh all on her own etc. Perhaps just sell the house to just split the money as the first step? If you agree to share the pension formally then she will get paid by the pension trustees and effectively you are getting a clean break which is what you are after.
Would you yourself agree to a large chunk of illiquid asset, the hassle of liquidity management, generating income and managing it for the next 30odd years, and perhaps not being eligible for certain state and council support because you have ASSETS?
Would you prefer the certainty of guaranteed income for life and carefree life?

unforeseen

In addition, since these are Army and Civil Service pensions, they are presumably index linked and more secure than most private pensions. 

I am not sure about the CS pension but believe that index linking for the wife's portion of the Armed Forces pension ceases on split

DairyQueen

Note that there are widow's benefits attached to your pensions. These would be foregone on divorce. An actuarial valuation of your pensions would assign a monetary value to these lost benefits.

As has been mentioned, it is likely that your wife will receive more than 50% of your joint assets/income as you have formed a new relationship and she is single. You are therefore able to benefit from your new partner's income and also share housing costs. Two do live cheaper than one and 'needs' will be high on the list of a court's considerations.

A court would aim to equalise your living standards. Given that you are both in your 60s?, and your wife has no occupational/private pensions, it is unlikely that a court would deem it fair that you retain 100% of the occupational pensions, whilst your wife loses 100% of that guaranteed income and the widow's benefits. 

The court will also be keen to avoid your wife becoming dependent on welfare in old age. Her state pension alone may be beneath the minimum income requirement. If so, she would be entitled to various benefits when she reaches pension age.

As your wife has so little income of her own it would be unwise for her to forego a guaranteed, inflation-linked income for life in exchange for 50% of a £300k marital home.  Her financial situation would be quite precarious for the rest of her life. Any legal advisor worth their salt would advise against such a settlement.

The costs of moving home are such that the house equity is not necessarily £300k if she downsized. Even if she did realise £150k then annuitising that amount would not replace the lost pension benefits.

The priority for the court would be that you are both suitably housed and have enough income to live on (similar standard of living). It seems that there are sufficient assets and income to achieve this but it may require a settlement that includes income as well as a home for your wife.

This is a very long marriage and, at your age/s, there is little chance of rebuilding assets or increasing pension income. That would also be taken into consideration by a court.

Thrugelmir

Have you discussed your proposal with a family solicitor?  I'd work on the assumption that your ex will seek advice as well. Best to obtain an biased opinion. 

TBagpuss

unforeseen said:

In addition, since these are Army and Civil Service pensions, they are presumably index linked and more secure than most private pensions. 

I am not sure about the CS pension but believe that index linking for the wife's portion of the Armed Forces pension ceases on split

Yes, that's why she may need more than you might immediately think, to put her in the same opposition. Splitting a pension 50/50 rarely results in both parties having the same income, normally on divorce you'd get a proper pensions report where they are told what outcome you want (e.g. equal income from state retirement age) and they calculate what % split is needed to achieve that outcome, taking into account whether the pension for the non-member of the scheme can stay with the same provider, and whether it is paid on the same or less beneficial terms if it can be. 

It's complex as every pension scheme has it's own rules.

Alias_Omega

PompeyPete said:

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

Assets -

House value £300k
savings [c£190k]
Pension £1840 per month
State Pensions (Applicant & Respondent)

Debt -

NIL

Other Assets - 

Cars
Motorbikes
Jewellery

All you really need to tell us, is that. What you want, and what she wants will be different. If you left her, she will be upset with you, and want you to pay!

I would be looking for, as a starter the following - 

• House is sold. Asset is split 50/50
• Savings is split 50/50
• Pension is split 50/50
• State Pensions split 50/50 (if not equal, then each party retains)

This would see each party with - 

• £245,000 cash each.
• £11,040 pension each (per year)
• State pension each

Ex- Wife can use the £245,000 to buy a home, use the £11,040 plus state pension as a income. So £20k (gross) a year income. Supplemented with work etc.

<This would be the neutral starting point>


However, 

You can propose to off-set the Pension...its going to be costly. You'll need a CETV, and that will give the true value of the Pension. As its in payment, its likely to be £600k or so. If her 50/50 share was £300k, you'd need to be looking at giving her £200k (cash) to keep that part of the pension. Turning a CETV into real money value is difficult (duxbury calculations), however it can be reduced by say 20% for being "tax free lump sum" etc. Sadly early access discounts don't apply here, as its already in payment..

She could be looking at (example) - 

House - £150k (her share)
House - £150k (your share to offset pension)
Cash - £50k (from you to offset pension)

That would give her the house, plus only state pension as an income. The £50k cash will only last 50 months, based upon the "neutral" starting point.

Risks - 

1. Your pension, plus your state pension, plus her state pension was there to provide you with funds for your retirement (both of you!).

2. You may need to provide her with Spousal Maintenance to maintain the lifestyle she  had; that can also be offered as "lump sum", so expect to give more up cash.

Final advice -

1. Seek a solicitor, get some paid for advice.

2. Nothing stops until the "Consent Order" has been approved by the court at Decree Absolute. Everything grows until that day! If you save more, she is entitled to 50% of it. If she gets more debt, you take 50% share of it!

3. Get a CETV, it costs £180 from Veterans UK.

Alias_Omega

I've just been through something similar and was very lucky,

Signed on for LOS 32, just reached 21 years, so APFS75 not eligible for payment until age 65. This made the annual pension somewhat £8k a year in 2062  CETV came back at £140k, her share of the CETV was £46k. I had to offset this with £27k physical cash. The CETV offset was reduced due to early access, tax free lump sum etc.

Now, if had clicked over to 22 years service, that pension would have jumped to £12k, plus the £40k lump sum etc. A whole different ball game...

jamesperrett

As I understand it, Alias_Omega's assessment looks fairly accurate. The cash equivalent value of your pension is likely to be at least £500k so you would almost certainly have to give up a portion of your pension as well as the house.