Divorce - PSO or cash or mix

Minky123lala

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

Marcon

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

What's your solicitor saying about all of this? Based on what is admittedly very limited information, it all seems a bit one sided, with rather a lot of concessions being demanded of you.

Minky123lala

Hi Marcon,
Thanks for the quick reply. One point of view is anything better than 50/50 in my favour would be a win. I have some c.£130k savings/investments which will be gobbled up buying him out of the house, plus I will need to take out a mortgage and loans costing c.£105k in interest over 13 years to do that. Then borrow another £100k on top if I went with option a.    

flaneurs_lobster

And your solicitors view?

Pat38493

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

Do you (and/or he) have a solicitor involved?  It's not clear how the precise number £187,500 has been proposed if it's not through a legal disclosure process and not 50% of the amount.

I think that if you want to do pension sharing, you will need solicitors and disclosures as this can only be done through a court process.  I am also not sure whether the court will accept a mutually agreed settlement on that without examining whether both of you will have sufficient funds in future years. i.e. yes the courts might say that you are not giving him enough, but you would have to discuss that with a solicitor.  I think that the courts have to satisfy themselves that you have provided sufficient and fair provision for his future needs without compromising your future needs as much as possible.  Further, if you are effectively keeping the custody of the children and he has no money to pay child maintenance, they might also take the view that if you give him a lot of cash, he has to pay child maintenance out of the money you give him - again you would have to discuss with a solicitor.

Beyond that - the answer to a or b, is probably neither, because cash outside the pension is worth more than money inside the pension due to the accessibility and tax status of the pension.  Therefore if he wants to take cash instead of pension, it should be less (assuming the starting pension number is correct).  Normally it requires an actuary (at both of your joint cost) to figure all that out.  If you do some internet searches about it there are a few articles out there about how it works.

As far as I remember, normally if giving cash instead of pension, there is an ajustement on the cash downwards for a) Tax already paid and b) when the money can be accessed by the receiving party (if relevant).

In any case, I suspect the first question they will ask is, why £187,500?

You can also of course try to do everything with cash outside of the pensions and avoid the courts, but the problem there is that you won't be able to get a final clean break order and so you will be exposed to potential future claims with no time limit.

To stress:  I am not a divorce lawyer so this is based on my limited understanding and experience and really you should put all this to your solicitor for advice.

rebs

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

I can't really comment on the specific numbers, but I can tell you about my experience with having a PSO without getting a PODE report.  My ex husband had DC pensions worth just under £1 million and I have a DB with a CETV of £200k.  We negotiated a deal ourselves which had my ex husband retaining all of the equity in our house, in exchange for about 80% of his DC pension pot.  The judge initially queried the Consent Order.  We submitted a rationale for our chosen split and it was then signed off by the court. 

While we were negotiating, I had numerous spreadsheets attempting to model scenarios of the various ways we could have divided our assets through my retirement (divorced at 60) so I am pretty confident that the deal we struck is going to work for me.

Cobbler_tone

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

Hi Minky...I will share my experience, which whilst not identical has some distinct similarities and it helps to know others understand the challenges of what you are dealing with.

Firstly, I drove my financial settlement via mediation. Without getting too personal my ex was VERY difficult to deal with and earnt a fifth of what I did, whilst lacking any personal accountability financially...i.e. 5 years later she is still in a job on £12k a year and taking universal credits...anyway. You will know that the more you can do without solicitors will save money, especially as I paid for both solicitors. From separation to divorce took just over 5 years, 6 years including the house sale.

She stayed in the home and there was £100k mortgage which I fully funded for 6 years whilst the divorce took place.
I rented and was pretty skint for those 6 years. I also cleared a couple of loans and debts. The kids were 15 and 12 at the time.
The deal was for her to downsize and be mortgage free and my motivation was to retain my pension. At the time my pension was valued at £675k, now it is £420k.
So she took 100% of the equity, £61k lump sum (NOT spousal maintenance), which I clear next year and CM didn't kick in until the house was sold.
This year the house finally sold, she has a new house, I pay my CM each month and send her £50k next year to clear the decks.

I have zero assets but I do have my pension. That is how I designed it. My ex (and more importantly children) have a house paid for and I have the security of a pension for life, not being precious about potentially buying again. I may do one day. 

I reckon the whole process cost me over £500k but I don't regret how I did things. I still think future generations will look back at how messed up divorce laws are but you have to do what you have to do.

Clearly every situation is different but if you can find a way to 'pay him off' it takes out the cost and complexity of sharing orders. The actuaries will sting you for a few thousand on a DB scheme.
Just make sure everything is full and final and can assure you that I know how you feel! Hang in there, there are happier days ahead. 
I know have two solid pensions and more money than I have ever had....cash rich, asset poor!

Minky123lala

flaneurs_lobster said:

And your solicitors view?

anything better than 50/50 would be a win looking at the whole picture. He could not give specific advice on this pension offsetting vs PSO as he is not a pension expert

Minky123lala

Pat38493,
Thanks for taking the time to share your thoughts. Yes I have a solicitor - which I have paid for advice so far, but they were not able to advise on this specific pension related point. He has had some free solicitor advice and a MIAM session with a mediator. 

I'm not exactly sure on why £187,500 - I will try to find out, without provoking him, which is difficult. I think you are probably right that I'll have to pay out for a PODE report. I'm not trying to avoid the courts and absolutely hope to agree and get a consent order, but just to minimise the risk of a judge disagreeing with what we agree and having to pay more. I'm not trying to be tight, but the law seems to add insult to injury, where I've grafted so hard for 30 years and sacrificed so much compared to someone who has always taken the easy option, been very happy to be a parasite and mismanaged their own part of the finances, but they can then just walk away with so much. Wish I had been more knowledgeable before marrying.

Minky123lala

rebs said:

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

I can't really comment on the specific numbers, but I can tell you about my experience with having a PSO without getting a PODE report.  My ex husband had DC pensions worth just under £1 million and I have a DB with a CETV of £200k.  We negotiated a deal ourselves which had my ex husband retaining all of the equity in our house, in exchange for about 80% of his DC pension pot.  The judge initially queried the Consent Order.  We submitted a rationale for our chosen split and it was then signed off by the court. 

While we were negotiating, I had numerous spreadsheets attempting to model scenarios of the various ways we could have divided our assets through my retirement (divorced at 60) so I am pretty confident that the deal we struck is going to work for me.

Rebs - thanks for taking the time to share your experience. That is really encouraging that you were able to get the signoff without a PODE report, gives me some hope of being able to do the same.

Can relate to your spreasheet models - same here, trying to do the maths with multiple variables. I'm also considering using ChatGPT and seeing what it says, since just been quoted £3400+VAT by Mathieson Consulting.

Hope it all works out for you.

Minky123lala

Cobbler_tone said:

Minky123lala said:

Hi,
We are divorcing for a number of reasons (I understand which are irrelevant to the financial settlement). I have unfortunately over the years (without intention) turned into the main breadwinner and paid for pretty much everything in our marriage (again, I know largely irrelevant in the eyes of the law), despite hoping for equality in every aspect of it. My husband now wants a chunk of my DB final salary pension, in addition to half the value of the house (I'm buying him out, so I can minimise disruption to our children, they will spend at least 2/3rds of time with me and I will continue to pay pretty much all of their costs - he quit his job and even if did get one CM would be c12-16% of not a lot).

In addition to the value of half the house, he says he wants £187,500 of my pension, but he would take either :
a. £100k as cash (pension off-set) plus £87,500 PSO transfer 
b. £12,500 as cash (pension off-set), plus £175,000 PSO transfer
Without having to spend c.£2k on a PODE report (which isn't so relevant here because we are not trying to get to equality of income or capital), I'm trying to reach a decision. I'm kind of favouring option a, but would highly appreciate any points of view.

My CETV is c.£635k DB, he has DCs with CETVs c.£165k. We both should get full state pensions also. I am 48, he's 54.
I would have to borrow the £100k for option a, paying interest. 
I am aware that CETVs for DBs are sometimes lower than the cost of what it would cost to get the same income on the open market, so I would 'lose' more than the stated value in reality of any share I transfer to him.
I'm also aware of cash being worth more than pension - due to tax and utility, however of the pension amount he would draw down 25% tax free at 55 and then the rest in a way to minimise paying tax and he is a lower rate tax payer.
So I'm trying to triangulate these factors to decide. Would really welcome thoughts on a or b?

Also interested in any experiences of doing something similar, where a mutual agreement has been reached and reflected in a consent order, with a PSO. Has the court approved, especially without a PODE report?  Or am I at risk by doing any kind of PSO of having to give him more of my pension, so would I be better off by offsetting the total £187,500 as cash (obviously would have to saddle myself with more debt and would be more expensive / longer to payoff).

Thanks for any replies, this is such a nightmare.

Hi Minky...I will share my experience, which whilst not identical has some distinct similarities and it helps to know others understand the challenges of what you are dealing with.

Firstly, I drove my financial settlement via mediation. Without getting too personal my ex was VERY difficult to deal with and earnt a fifth of what I did, whilst lacking any personal accountability financially...i.e. 5 years later she is still in a job on £12k a year and taking universal credits...anyway. You will know that the more you can do without solicitors will save money, especially as I paid for both solicitors. From separation to divorce took just over 5 years, 6 years including the house sale.

She stayed in the home and there was £100k mortgage which I fully funded for 6 years whilst the divorce took place.
I rented and was pretty skint for those 6 years. I also cleared a couple of loans and debts. The kids were 15 and 12 at the time.
The deal was for her to downsize and be mortgage free and my motivation was to retain my pension. At the time my pension was valued at £675k, now it is £420k.
So she took 100% of the equity, £61k lump sum (NOT spousal maintenance), which I clear next year and CM didn't kick in until the house was sold.
This year the house finally sold, she has a new house, I pay my CM each month and send her £50k next year to clear the decks.

I have zero assets but I do have my pension. That is how I designed it. My ex (and more importantly children) have a house paid for and I have the security of a pension for life, not being precious about potentially buying again. I may do one day. 

I reckon the whole process cost me over £500k but I don't regret how I did things. I still think future generations will look back at how messed up divorce laws are but you have to do what you have to do.

Clearly every situation is different but if you can find a way to 'pay him off' it takes out the cost and complexity of sharing orders. The actuaries will sting you for a few thousand on a DB scheme.
Just make sure everything is full and final and can assure you that I know how you feel! Hang in there, there are happier days ahead. 
I know have two solid pensions and more money than I have ever had....cash rich, asset poor!

Hi Cobbler_tone,
Thanks for taking the time to share your experience and giving me some hope of happier times to come - I really appreciate.

Crikey, sounds like you've been through the mill! 6 years, OMG, it's not been 6 months yet and I'm so fed up with the whole thing, so well done for toughing it out and most importantly doing right financially first by your children. Sounds like she had a great outcome, I guess it makes it an easier bitter pill to swallow if you know that the children will really benefit. That's the part I'm not sure of in my situation - he has been partial to gambling and drinking, so I just hope when he does spend time with the kids that he does spend what he walks away with on them.

I think the whole thing will be pretty close to costing me £500k too (that's best case and without the interest I'll have to pay on new mortgage / loans etc). The law is ripe for reform in my opinion. I can't see myself ever marrying again, far too much risk and stress.

Glad your situation has improved! Thanks.