How to protect your pension after divorce – everything you need to know
DIVORCE is one of the most stressful experiences you can go through in life, not least because of the debate over how to split your finances.
While the family home is often given careful consideration, pensions are a vital factor often overlooked.
But this can have severe consequences later down the line.
Pension savings can be worth hundreds of thousands of pounds, yet, all too often these cash pots get ignored when it comes to divorce, and it’s usually women who miss out.
Their pension pots are often smaller than men’s due to taking career breaks to look after children or working part-time.
The oversight costs women more than £77,000 on average when it comes to retirement, according to research by provider Scottish Widows.
Yet, more than more than 60% of divorced women didn’t go through pension assets during a divorce.
Susan Hope from Scottish Widows, says: “The main reason women still lose out is because they simply are not aware of the potential value and that pensions should be included in the family assets.
“Divorce can be an extremely stressful and intense time. It can be easy for pensions to sink down to the bottom of the priorities, especially if it’s a DIY divorce.
She added: “Some may prioritise keeping the family home or taking more cash from a sale, but without seeing the full picture..
“This could be at the expense of a fair pension share, so it’s important to have the right conversations.”
HOW TO DIVIDE A PENSION
There are a few different ways to split a pension.
It is important to note the value of the pension may be offset against other assets.
For example, one person could agree to take a bigger share of the home instead of any of the other person’s retirement pot.
Or the pension could be shared with an agreed percentage transferred to the former spouse.
In this case, it’s a clean break, according to Dean Butler of pension firm Standard Life.
He adds: “On the downside, it can be quite complicated to set up and needs an order from the court.”
Another alternative is called a “pension attachment order”, which is where one person agrees to pay a portion of their pension income to the other, but only when it starts being paid.
Dean says: “This also requires a court order and the first person retains quite a lot of control of when and how the pension is used, and payments will stop when they die.”
WHAT TO DO WITH CASH
After a divorce, you should always take stock of how much you’ll need for retirement and whether you have enough.
Rachel Vahey, head of public policy at AJ Bell, said:“You may find the income you expected to get at retirement has taken a hit.
“Whether your ex-partner kept the bigger proportion of the pension or you shared some of your retirement savings with them, now is the time to think about how to boost your pot.”
You can go through a three-step online pension check on the government’s website nestpensions.org.uk to check if you are on the right track for a comfortable retirement.
If you are falling short, look at what your employer can offer.
It could be worth upping contributions through a workplace scheme, especially if your employer will match the contribution.
Even increasing savings by a small amount can make a big difference in the long term.
If you do receive a share of a pension pot, you’ll need to think about whether it’s in the right place.
You could save fees by combining it with any other pensions.
Having your cash in a single and bigger pot also makes it easier to manage.
CHANGE YOUR EXPRESSION OF WISHES
Many people don’t realise that pension assets are not usually covered by your will.
And if you die before taking a private pension, your provider will then decide where the cash goes.
This is usually done based on an “expression of wishes”. This is a form you’ll usually fill out when setting up the savings pot.
Crucially, if you gave your spouse’s name when you set up the account, you need to remember to change this when you divorce – assuming you no longer want them to receive the benefits.
Ed Monk, associate director at savings provider Fidelity International said: “If your life circumstances change and you’re seriously considering ending your marriage or civil partnership..
“It’s important to change your expression of wish to reflect any change in who you want to receive your pension payments in the event of your death.”
'I would definitely be worse off'
TRACEY Ford, 51, was married for 14 years and initially didn’t consider her ex-husband’s pensions as part of joint assets.
The celebrant from Johnstone, Renfrewshire was mainly focussed on how to take over ownership of the house, when she decided to consult a solicitor on the situation.
It was only then that she was made aware that she would be due a portion of his civil service final salary pension.
She says: “I had been self-employed for 25 years so didn’t have a workplace pension.
“My ex-husband’s pension was a sizable asset that I had completely overlooked until the solicitor pointed it out.
“We then went through a process to set up the appropriate paperwork so I’ll receive a portion in the future.
“I would definitely be worse off in retirement had I not taken the pension into account.”
Nationwide £100 payout
MILLIONS of Nationwide customers are to receive a £100 cash sum over the coming weeks.
Around four million will receive a share of £410million as part of Nationwide’s Fairer Share programme, which rewards its banking customers.
You will need to have opened a current account with Nationwide before March 31.
Those with £100 in savings at that time will also see the boon if the account was used within the first three months of this year.
And Nationwide mortgage borrowers with more than £100 outstanding qualify, too.
The cash will be paid into Nationwide current accounts between June 18 and July 4.
Chief executive Debbie Crosbie said: “Nationwide has had an outstanding 12 months.
“We returned a record £2.8billion in value to our members and recorded our highest ever year for growth in mortgage lending and retail deposit balances, and we remain first for customer service.”
It comes after Nationwide paid £50 to customers in April and May as part of its “Big Nationwide Thank You” following the building society’s Virgin Money takeover.
Those who have been Nationwide members since March 31 can currently get a £200 bonus by switching to Nationwide’s FlexPlus, FlexDirect or FlexAccount.
An existing member is someone who has held a mortgage, savings account or current account with the company.
Cash boost for retired
CHANCELLOR Rachel Reeves has announced plans to overhaul the UK pension system, aiming to increase average retiree savings by £6,000.
The reforms, part of the forthcoming Pension Schemes Bill, involve consolidating smaller defined-contribution pension schemes into larger “megafunds”.
Assets will be pooled from the 86 separate Local Government Pension Scheme authorities into eight funds by 2030.
The Government draws inspiration from successful models in Canada and Australia, where large-scale pension funds have achieved higher returns through diversified investments.
By pooling assets, the UK aims to enhance investment opportunities and stimulate economic growth.
Each megafund will set specific targets for local investment, potentially securing £20billion for community development.
While the reforms promise increased returns and economic benefits, experts warn that the consolidation could overlook the advantages of smaller, well-managed schemes.
The Government plans to introduce the Pension Schemes Bill next year, with further consultations to make sure the reforms meet the needs of savers and the economy.
The Government says this is a significant shift in the UK’s pension landscape, aiming to balance individual retirement savings with broader economic objectives.