Pensions and divorce

TurtleyMe

Not sure if this is the right place to post... My husband and I have just started divorce proceedings and are amicable. We were naively looking to split the value of our home (no mortgage) between us and equally share our combined debts and modest savings. Having reached a figure I would then remortgage for that amount to buy him out of our home. We have no children.

I was happy to go with this until we thought about pensions. My initial stance was to just keep our own but we know that my pension is not great as it was a defined benefit one that was frozen about 10 years ago, so the final salary it uses is from a lot earlier in my career when I was earning 60% of what I do now. 3 years ago I deferred this pension and started a new DC one which has a modest pot of 30k currently and I am 52.

He on the other hand has 2 DB ones (the cetv value of first is double mine and was paid into for same length of time roughly, still waiting on cetv for 2nd one).

We don't want to get solicitors involved and I can't afford to pay for IFA as I have debts to clear, will have a new mortgage to pay and potentially a pension to start paying more in to.

How is the best way to look at the values. Is it simply a case of me plugging in my estimates into a pension planner tool (I have used moneyhelper) and then looking at his projected payments to see the difference in what it predicts he will get? I potentially am looking to pay him a bit less to buy him out of the house so I have some spare money to pay into my pension? However he will still need enough for a deposit etc and what is fair for the fact it is half his house.... just want to do what is right, but also have enough to live on...

Emmia

Could you have part of his pension assigned to you, to pay out when you're in retirement?

What I presume you want is money (a pension) for when you retire, if you received x% of one of his DB schemes from that point would that be easier than trying to split things completely now?

Marcon

Emmia said:

Could you have part of his pension assigned to you, to pay out when you're in retirement?

What I presume you want is money (a pension) for when you retire, if you received x% of one of his DB schemes from that point would that be easier than trying to split things completely now?

You're referring to 'earmarking' - only a court can order that.

Cobbler_tone

Only you and your OH can decide what is 'fair', unless you want to pay for an actuary (not cheap) and go the 'official' route.
If you are amicable just have full disclosure and map it out, then take it to a mediator who may give you input or ask questions you haven't though of.
If you are divorcing then you need a financial order or else you could both be negatively impacted in the future.
It sounds as though you are a good position (currently) to have grown up conversations, so do your best to keep it that way! Legal bills and advice will soon mount up but mediation is money well spent. 

Marcon

TurtleyMe said:

I was happy to go with this until we thought about pensions. My initial stance was to just keep our own but we know that my pension is not great as it was a defined benefit one that was frozen about 10 years ago, so the final salary it uses is from a lot earlier in my career when I was earning 60% of what I do now. 3 years ago I deferred this pension and started a new DC one which has a modest pot of 30k currently and I am 52.

Not sure what you mean by this? You've said in your other post (which I've asked to be merged with this one) that 'I do have an old defined benefit pension but I came out of this a few years ago (after it has been frozen about 12 years ago)'.  Do you have a current CETV for it? It won't be frozen, but revaluing each year from the time you left until you access the benefits.

TurtleyMe said:

He on the other hand has 2 DB ones (the cetv value of first is double mine and was paid into for same length of time roughly, still waiting on cetv for 2nd one).

We don't want to get solicitors involved and I can't afford to pay for IFA as I have debts to clear, will have a new mortgage to pay and potentially a pension to start paying more in to.

Yet in your other post you've said 'I am looking for probably an independent pension advisor to that I can work out what I need to pay in to increase what I will have coming out when I retire'. Maybe look for one to help you work out how best to deal with the pension issue in your forthcoming divorce?

TurtleyMe said:

How is the best way to look at the values. Is it simply a case of me plugging in my estimates into a pension planner tool (I have used moneyhelper) and then looking at his projected payments to see the difference in what it predicts he will get? I potentially am looking to pay him a bit less to buy him out of the house so I have some spare money to pay into my pension? However he will still need enough for a deposit etc and what is fair for the fact it is half his house.... just want to do what is right, but also have enough to live on...

Sadly not that simple where DB pensions are involved. Think hard before trying to go it alone on the pension side of things. You will need a court order if there is going to be any sort of pension sharing - and the DB schemes will need to be asked to provide CETVs specifically prepared for divorce purposes.

Women miss out massively on pensions when they divorce because it is such a hugely complicated area - and the cost of taking advice at a time when money is often in short supply deters them from seeking proper professional help. 

Silvertabby

As Marcon says, a CETV for divorce is a specific calculation that can only be carried out by the pensions administrators.  You will each need to request your own calculations, stressing that they are for divorce purposes.

If you are looking to keep things simple, then just class the totals as marital assets and divide as you see fit.  ie, if his pension values are higher than yours, then you take a greater share of the house or other assets.

But if you are looking at a PSO (pension sharing order, in which X% of one person's DB is awarded to the other) then you would need a Court Order specifying this.

Just a point - even though you are amicable now, you really need to include a financial clean break in your divorce.  That way, if one of you falls on hard times they can't come back and make a claim against the other's current assets. 

Cobbler_tone

Silvertabby said:

you really need to include a financial clean break in your divorce.  

100%

Google and download a D81 consent form. It will help you to map out your financial position, including a section to input your current CETV's for divorce. You should be able to get close to 50/50 on paper if that is your intention to keep things more straight forward. It was how I successfully navigated the process...whilst the CETV was at an all time high, not in my favour. 
A tough process, so good luck.

TurtleyMe

Thank you all for the replies. I have looked into getting pension advice but quotes I have had are all 1.5k minimum as a starting point and I don't have that money spare. 

For my DB one I have a transfer out figure of 220k (they need £450 to give me cetv but lady I spoke to said it would be roughly the same, just couldn't be used in court - which I am hoping we don't need anyway).  I do still get a statement each year and currently I can take it at 60 and it would give me around 13k. I won't be able to retire at 60 due to remortgage etc and will now look to be working until 67.  My new pot in DC is 32k.  .

I don't really want to touch his pensions if possible and from comments above that would involve courts and more fees.  I am thinking (with little knowledge in this area) that an ok way forward is to just work out what I need to live on at retirement and ensure using calculators that my pensions should give me that? By playing around and plugging in adding in more payments e.g. add extra £300 a month, I can work out how much mortgage I can afford to pay and then just buy him out at that amount if that makes sense?  i.e. If we split house down the middle I would be looking at 850 pcm mortgage, if I buy him out at a 75:25 split then I would be paying 425 mortgage and so have extra free to top up my pension.  I just need to play with pension calculators until I find the right spot (ensuring he will have enough for a deposit). 

I guess I am asking if this seems sensible?  I don't really know where to turn and I can't afford to pay for advice but I am worried I am looking at it all simplistically and need to protect my own future but equally don't want to cause hardship for him.

Albermarle

As said a financial clean break is desirable as part of a divorce. It makes sure each side gets their fair share, and stops any resurrection of the discussions at a later date. Although you will need some legal involvement, that does not necessarily mean that you have to be at each others throats.

If you really do not want anything like that, than I suppose an informal way would be for both of you to list your assets ( for the DB pensions, use the latest CETVs). Then look at a practical way of splitting the total 50:50.
For example one person keeps the house, whist the other keeps a higher pension provision, and then use other savings etc to even things up. 
That is roughly what the lawyers do in many divorces, because couples ( amicable or not) find it difficult to reach agreement themselves.

TurtleyMe

Thanks Albermarle. We have initiated a DIY divorce and as part of that I think we list all assets and liabilities and how we are splitting it all. I think that is a consent order?  Doesn't that give us the financial clean break? Once divorced and consent order has been agreed as part of it I assume it is all a done deal? Apart from being amicable we also have some shared debts (which we will split) and are both looking at remortgaging in our 50s so we are desperately trying to avoid costs where we can...

Cobbler_tone

TurtleyMe said:

Thank you all for the replies. I have looked into getting pension advice but quotes I have had are all 1.5k minimum as a starting point and I don't have that money spare. 

For my DB one I have a transfer out figure of 220k (they need £450 to give me cetv but lady I spoke to said it would be roughly the same, just couldn't be used in court - which I am hoping we don't need anyway).  I do still get a statement each year and currently I can take it at 60 and it would give me around 13k. I won't be able to retire at 60 due to remortgage etc and will now look to be working until 67.  My new pot in DC is 32k.  .

I don't really want to touch his pensions if possible and from comments above that would involve courts and more fees.  I am thinking (with little knowledge in this area) that an ok way forward is to just work out what I need to live on at retirement and ensure using calculators that my pensions should give me that? By playing around and plugging in adding in more payments e.g. add extra £300 a month, I can work out how much mortgage I can afford to pay and then just buy him out at that amount if that makes sense?  i.e. If we split house down the middle I would be looking at 850 pcm mortgage, if I buy him out at a 75:25 split then I would be paying 425 mortgage and so have extra free to top up my pension.  I just need to play with pension calculators until I find the right spot (ensuring he will have enough for a deposit). 

I guess I am asking if this seems sensible?  I don't really know where to turn and I can't afford to pay for advice but I am worried I am looking at it all simplistically and need to protect my own future but equally don't want to cause hardship for him.

I understand your desire and need to consider you future position in terms of retirement etc.
However (maybe harshly) that isn't too relevant for your divorce now i.e. you will have very different situations by the time you reach retirement.

Write down your CETV's, your house equity and any other assets/debts, down to your position with utilities etc. That will give you a balance sheet and it sounds as though your best approach will be to do the balancing via your equity. Keeping your respective pensions to yourselves certainly simplifies matters.