Need a Pension Actuary & Divorce process guidance

Sarahspangles

Farside71 said:

Thanks, I'm awaiting a CETV for my DB, I honestly have no idea what it is going to be as I've not had to request one before even though I've been a deferred member for over 3 years now.  As we are in Scotland about a third of DB accrual is outside of marriage so in theory can remain with me regardless but I'm having to get my head around potentially losing ISAs, avcs, DCs and most of the house to keep all my pension and whether that is in my best interest or not.  In some ways it's a financial decision no one really is expecting to actually have to make given most of us probably spent the vast majority of or working lives thinking about how to accumulate wealth.

I’ve gained a different perspective on this, but acknowledge it’s taken the full twenty years since my divorce to get there! When you’re actually going through divorce the personal, emotional impact makes it hard to be objective.

In the division of assets, if there is a net ‘loss’ by one divorcing spouse it may reflect that, had there not been a divorce, they would have been funding at least some of their partner’s share of outgoings into old age. If the ex gets a house mortgage-free or pension is shared on divorce that’s just an upfront payment of the accrued liability. In real terms though, the outcome is not likely to be 50/50, it’s more like 40/40 because two can live (a bit) more cheaply than one. And if there are young children, there are different considerations, I’m just considering an ‘empty nest’ divorce.

Almost everyone says ‘never again’ (unless an affair is the root cause?). But a lot of people get over it. I doubt they do so because it will improve their financial prospects to start a new relationship, and maybe they’ll be wary of marriage rather than cohabitation. But they’re not single forever.

If two people go into a long term relationship and each has some capital, whether that’s a smaller house/flat or liquid savings/investments, plus enough ‘pension for one’, and you add those together then they’re almost back where they were in the first marriage.

I observe the outcome is more often for one spouse to end up with the house - larger than their needs, and leaving them short on income for bills and upkeep - and the other to retain a pension that would have provided for two. Which in the long term isn’t the optimal starting point for either of them, in what might happen for them in the next chapter. 

Cobbler_tone

Sarahspangles said:

Farside71 said:

Thanks, I'm awaiting a CETV for my DB, I honestly have no idea what it is going to be as I've not had to request one before even though I've been a deferred member for over 3 years now.  As we are in Scotland about a third of DB accrual is outside of marriage so in theory can remain with me regardless but I'm having to get my head around potentially losing ISAs, avcs, DCs and most of the house to keep all my pension and whether that is in my best interest or not.  In some ways it's a financial decision no one really is expecting to actually have to make given most of us probably spent the vast majority of or working lives thinking about how to accumulate wealth.

I observe the outcome is more often for one spouse to end up with the house - larger than their needs, and leaving them short on income for bills and upkeep - and the other to retain a pension that would have provided for two. Which in the long term isn’t the optimal starting point for either of them, in what might happen for them in the next chapter. 

100% in my case. The main motivation to secure a mortgage free home for the children.
The bit missing is that both parties have a responsibility to maximise their income, which often doesn’t happen. It is why any spousal support is normally temporary these days.
Selective equality is still alive and kicking.

I am very happy being cash rich and asset poor and life certainly does move on.

Marcon

GDB2222 said:

Marcon said:

GDB2222 said:

As a rough guide, I would value pension at 15% less than other assets like cash in the bank. After all, if you have the cash, you can contribute it to a pension and get at least 20% tax relief. 

Just having the cash isn't quite the full picture. You can only contribute a maximum of £3,600 gross (£2,880 net) per year unless you have 'relevant earnings' which would enable you to make higher contributions - and you need to be under age 75 at the time you make the contribution.

Alternatively, look at the point where you draw the pension. You can get a quarter tax free, and the rest will be taxed at 20% say. That produces a combined overall tax rate of 15%. 

Where it gets more complicated is where the CETV doesn’t properly represent the value of the pension. 

That's not always the case. If it's a DB pension which is shared and the benefits for both parties remain in the original scheme, the amount of tax free cash will be dictated by the scheme rules.

One of the major issues with CETVs is that (in England and Wales) any split is made on a %age basis, and the CETV is then recalculated before any order is implemented - meaning that the amount which is actually transferred if a pension sharing order is made could be very different indeed, either bigger or smaller.

If ever there was an area where professional advice is essential, pensions and divorce must be well up the list!

BrilliantButScary

Cobbler_tone said:

Sarahspangles said:

Farside71 said:

Thanks, I'm awaiting a CETV for my DB, I honestly have no idea what it is going to be as I've not had to request one before even though I've been a deferred member for over 3 years now.  As we are in Scotland about a third of DB accrual is outside of marriage so in theory can remain with me regardless but I'm having to get my head around potentially losing ISAs, avcs, DCs and most of the house to keep all my pension and whether that is in my best interest or not.  In some ways it's a financial decision no one really is expecting to actually have to make given most of us probably spent the vast majority of or working lives thinking about how to accumulate wealth.

I observe the outcome is more often for one spouse to end up with the house - larger than their needs, and leaving them short on income for bills and upkeep - and the other to retain a pension that would have provided for two. Which in the long term isn’t the optimal starting point for either of them, in what might happen for them in the next chapter. 

100% in my case. The main motivation to secure a mortgage free home for the children.
The bit missing is that both parties have a responsibility to maximise their income, which often doesn’t happen. It is why any spousal support is normally temporary these days.
Selective equality is still alive and kicking.

I am very happy being cash rich and asset poor and life certainly does move on.

'Selective equality', it works both ways.