Both agreeing on dissolution

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81951002#Comment_81951002

According to this a couple who agree on the split can apply to the court for a consent order, without having taken legal advice.

Money and property when you divorce or separate: Getting a financial agreement - GOV.UK

jackieblack

https://forums.moneysavingexpert.com/discussion/comment/81951032#Comment_81951032

Well yes, you can apply, but it's still up to the judge to approve it.

The judge who did ours initially rejected it as they wanted confirmation. Once this was provided, it was approved.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81951038#Comment_81951038

Not an expert, but it seems a consent order can be granted without having taken legal advice, but it could be a judge will feel more comfortable approving it if there has been some legal input or a mediator has been involved.

I guess the more complicated it is, and the more money involved then that will affect the situation.

strugglinginDevon

https://forums.moneysavingexpert.com/discussion/comment/81951002#Comment_81951002

thanks Jackieblack

(Sorry for the late reply, working away from home meant 3 weeks away from my computer), my partner and I want the dissolution to go through as smoothly as possible so will look into independent legal advice for both of us.
Im working away again from next week for a few weeks so may have to see if I can arrange my advice online via phone or video call with a solicitor - if that’s even possible?

strugglinginDevon

https://forums.moneysavingexpert.com/discussion/comment/81951032#Comment_81951032

thank you again Albermarle

(Sorry for the late reply, working away from home meant 3 weeks away from my computer).

I’ve found a website (unsure if I can write it on here) that offers full Financial Consent Order writing for £269, drafted by SRA registered solicitors, so am hoping I/we can provide our financial breakdown and let them write it on our behalf.

strugglinginDevon

https://forums.moneysavingexpert.com/discussion/comment/81951038#Comment_81951038

The judge wanted confirmation that you’d had independent legal advice? Did you get a letter from the solicitor documenting this?
thanks again Jackieblack

jackieblack

https://forums.moneysavingexpert.com/discussion/comment/81985731#Comment_81985731

We had our Consent Order written and submitted to the court by a local solicitor (for a fixed fee), the court contacted this solicitor with the judge's comments/request, he contacted the solicitor my ex-husband had consulted to get confirmation that this had happened and responded to the judge accordingly

Exodi

poseidon1

Points made here reinforce the need for independent representation for each party in my view.

Amicable as this all appears to be, the wife may end up getting the short end of the financial stick with no roof over her head and limited/expensive ( in tax terms) access to her capital settlement via transferred (volatile) pension rights whilst OP retains tax free access to more stable residential property equity.

I think this is a mirror copy of my thoughts also.

The OP mentions his partner has just reached the age she can access private pensions and stated "if the pension split is agreed between the pair of us, would the funds transfer into her much smaller pension, or would it transfer into her bank/savings/current account as a cash sum, which she is hoping to use to buy a home."

This was a bit concerning to me and I fear the massive issue is tax and is at best being under-estimated, or at worse being missed entirely.

Let's say she has a £50k pension and the OP has £450k (9x as per OP). Let's say they have a house worth £250k, no mortgage and no other assets to keep it simple, so £750k total net assets.

Let's say they agree to split everything 50/50 (though this isn't suggested by the OP), so each wants to end up with £375k of something. Let's say they agree OP gets the house and £125k in his pension, and the partner gets £375k in her pension (so in practice, the house is OP's and £225k is transferred from OP's pension to the partner).

Great, on paper it looks simple and appears fair. OP owns a house worth £250k and has £125k in his pension, his partner has £375k in her pension that they discussed would be used to buy another house (perhaps for £250k) theoretically putting them in the exact same position. So she withdraws £250k from her pension as they planned…

Out of that £250k, £62.5k (25%) is tax free, meaning £187.5k is taxable. Assuming OP's partner is currently earning the median UK wage (about £40k), it means that of the £187.5k, £10,270 would be at the basic rate (20%) tax bracket, £49,730 would be at the higher rate (40%), £25,140 would be at the higher rate while reducing her personal allowance (60%) and £102,360 would be at the additional rate (45%). This means a tax bill of £83,062, or of her £250k, she'd be left with £166,938. The situation would be worse if we're talking a larger sum of money as it means a higher percentage at the additional rate of tax.

And as if that wasn't bad enough, due to accessing non tax-free cash, she'd also trigger the MPAA, meaning she'd only receive tax relief on up to £10k in pension contributions per year. Certainly less than ideal for someone who may intend to carry on working for a few more years (and possibly ramping up contributions and capitalising on tax relief as she nears retirement)!

It is very rarely a good idea to take out a massive amount out of your pension in one year as it is counted as income. Really it would be better to stagger it over many years to reduce overall tax burden.

Another option could be, for example, to only take out the TFLS to use as a deposit and get a mortgage for the rest which can be paid from employment. If she wanted to get rid of the mortgage quickly or wasn't concerned about the MPAA, she could withdraw smaller amounts (e.g. £10k p/a in the above example), ensuring she is careful about not dipping into higher tax brackets. Doing this would over half the overall amount of tax she pays withdrawing from her pension compared to the above.

Sorry to labour the point, but this is why I agree with the comment above. The OP's capital by comparison does not carry these obstacles.

She may or may not be aware of the above, but in any case you should both seek advice to protect yourselves. The stakes are massive.

To give a parallel example, during redundancies at work, we mention ad nauseum that not every element of the redundancy payment is tax free, and they are being given a gross figure. Despite this, more often than not, after they will query why they received less than they thought they were going to get. People just don't think about tax.

RAS

Might it be better for the partner to get the house, and a very reduced amount of pension? She can then sell the house as her primary residence if she wants.

The OP has the higher income and should be able to save a decent deposit and get a mortgage, even if it lasts until age 70.

strugglinginDevon

thank you both, sorry I forgot to add that when I bought the house 12 years ago, I put all of the deposit into it (50% of the purchase price) from sale of my flat I lived in.

exodi - would the judge who signs off the dissolution of 2 agreeing adults take into consideration the tax factors/examples you listed? (Genuine question by the way)

RAS - we are trying to work out the split so that I can remain in the house I bought in my name as it’s in the tiny market town I grew up and Im on the same street as my elderly parents.

Thanks again