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Pension sharing: what is it and how we can help

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When a marriage ends in divorce, one of the key parts of the legal process is to come to a financial settlement between both parties. In order to achieve this, they will need to declare all their assets. Aside from property, pensions can be one of the biggest financial assets that either party has, especially if couples have been together a long time. If there is significant difference in financial assets between each person, one option the court has is to make a pension sharing order. This is a court order for one party to transfer a specific percentage from their pension funds to the other person.

Pension share legislation was introduced in December 2000 to ensure provision for those who had reasonably been expecting their spouse to support them in retirement and therefore had minimal retirement provision. It is a very common consideration of many divorce proceedings.

We work with many local solicitors to support their clients once the pension sharing order is made. This is often, but not always, a female client acquiring pension funds from her former husband. Our adviser Paula Crawford is a specialist in this area. She works through the process from start to finish with the client and their solicitor.

How does a pension sharing order work?

Once divorce proceedings are underway both parties must submit documents regarding all existing pension arrangements. Sometimes the parties will agree or the courts may direct parties to arrange for an independent pension sharing report to be prepared where the pension assets for both parties are included and an indication of pension sharing to equalize assets is given. This is then used to ascertain how much should be transferred from one person to the other and to consider the options available to the parties.

The pension sharing report

When working with a client we receive the pension sharing report, which reviews the pensions of both parties. Often the report will provide options as follows:

1) To equalize the capital values of the pension funds, so both parties are left with a similar capital sum
2) To equalize the income from the pension, so both parties are left with a similar income in retirement.

There are a number of considerations on which legal advice should be sought in considering the options. This includes the type of pension or pensions, the transfer values, the age of each party and the length of the marriage.

Implementing the pension share

The report will include different options to achieve the pension share. Paula will work with clients to advise which is the best option. For example, if the pension in question is a defined benefit scheme often former partners will not be allowed to join the scheme. The scheme rules may mean they have to transfer their share into a pension of their own. We can arrange that for you. Alternatively the member may be able to join the scheme under their own name.

Other types of pension are generally more straightforward to split, and normally a share would be moved into a scheme of your own.
In some circumstances, the partner may wish to access a lump sum. This is quite common where the couple is over 55. In this case one partner may need cash to help buy a new house as part of the divorce process. Paula regularly advises on the best way to draw funds for house purchases.

What happens when there are several different pensions?

This is a common situation where a couple have been together a long time. It also happens where one person has worked for a number of different employers. It can make the pension sharing process more complex. However, Paula is able to review all the pensions and advise on the most straightforward way to access the share.

Can we help you with pension sharing ?

This is a very complex area. We feel you should have the benefit of separate and specialist financial advice together with your legal advice. If you are in the process of getting divorced and you need some independent financial advice please contact Paula Crawford. She is happy to speak to you and your solicitor about any aspect of pension sharing.

3 financial steps to take to protect the important things in life

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In the last few months have you stepped back to consider what is important? Have you been reviewing your future plans and finances? Have you realised the importance of ensuring your family and future are protected? After three months of lockdown, we are starting to see shops and businesses opening up. We are all getting used to a new way of working. Now is the perfect time to take some simple steps to ensure your finances are arranged in the best way to support your family. Here are our 3 steps to financial planning.

Step 1: Getting your finances in order

For most of us our mortgage payment is the biggest item of monthly household expenditure. You may have applied for a mortgage holiday in recent weeks. If you haven’t, the option is still available. However, if you can avoid this, we would suggest you do so. Some lenders are saying they think this should affect your ability to borrow in the future.

Aside from this, it can be a good idea to check if you are on the best mortgage deal. We may be able to find a better rate or a better option to help you reduce that monthly payment. There has been a change in the mortgage market, with lenders trying to keep their borrowers more actively, rather than borrowers having to change lender every time their mortgage product ends. However, your existing lender won’t do a thorough review of the market for you! We will review what they have to offer and advise you on the alternatives, for example whether a 2 year or a 5-year fixed rate might suit you best. When we find the right product – whether this is with your current lender or a different lender – we can arrange a transfer for you on your behalf, often at no charge to you.

Step 2: Planning for your future

Are your pension arrangements well planned? If you have been working for any length of time, it is likely you have a number of different company pension schemes and maybe a personal pension which needs reviewing. Now is a good time to ask, are you in the right plan, are you investing in the right funds and are you paying too much in fees?

We can help you identify what plans you have, and check that they are still suitable to support you in retirement. A quick check can also reveal who stands to gain any death in service benefits, which you can change.

For our small business owner clients, we can help you plan a personal pension scheme to support you in the future. Even if your business finances are under pressure right now, starting a pension is an essential step.

Step 3: Supporting your family

Whenever we see a client, we always check to see if they have made a will. So many financial arrangements are set up to benefit you in your lifetime. But did you know they can also be structured to support your family after your death? If you would like us to recommend a solicitor to help you with this, or if you need us to work with your solicitor, please let us know.

We can also ensure that you have arrangements in place to support your family after your death or if you can’t work because you are ill. If we have learnt anything in 2020 it is that life can take some very unexpected turns. We can find the right type of plan at the right monthly costs with cover levels that are right for your needs. We can check any existing plans you have to make sure they are still suitable for you.

Hopefully our 3 steps to financial planning were helpful. If you would like to speak to us about any aspects of your financial planning, get in touch. We are booking appointments either in the office in Lichfield or via video call. Call us to make an appointment 01543 410 512

Your financial resolutions for 2020

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Have you resolved that 2020 is the year you get your financial situation organised? You may have been thinking about looking at your pension or starting a savings plan for your children? Perhaps 2020 is the year you buy a bigger house for your growing family, or downsize as they leave the nest? Maybe 2020 is the year you will retire and make a start on all your big life goals. Whatever your financial resolutions for this new decade, we can help you achieve them.

1) I want to review my pension

If you are self-employed, you may have no pension provision at all, so this should be a priority. The sooner you start, the more you can save before you retire. Even a small amount saved regularly will mount up over a long period. We can review the market and find the right product for you.

If you have a personal pension that hasn’t been reviewed for a while, it would almost certainly benefit from changes to the investment funds.

And if 2020 is your planned retirement year (lucky you!) we can help you decide what to do with your pension pot. There is a huge range of annuity products available for you to invest in and we can advise on those. And of course the new pension freedoms mean you can withdraw it and spend it in any way you choose (sensibly of course!).

2) I want to change my mortgage

If your mortgage product is due for renewal this year, it is worth reviewing the market to see if there is a better deal for you. There has been a change in the mortgage market, with lenders trying to keep their borrowers more actively, rather than borrowers having to change lender every time their mortgage product ends. However, your existing lender won’t do a thorough review of the market for you – we will! And if we find a better product, we can arrange a transfer for you on your behalf, often at no charge to you.

If 2020 is the year for moving house, we can also help you. We start with understanding your current position, the amount you want to borrow and your employment circumstances. Once we know what you are looking for, we can do a thorough search, calling on our up to date knowledge of the market. Using industry recommendations and our specialist software we find the right product from the thousands of mortgages available. We can particularly advise if you have unusual financial circumstances, you need bridging finance or need to borrow large sums.

3) I want to ensure my family is provided for

This is an area where many of us bury our heads in the sand. But sadly many of us know someone who has died young, or who has had a serious illness. A lack of protection planning can have a massive impact on family finances. It is worth considering how your money might run out, if anything happened to you as a result of long-term sickness or injury. This tool from Legal & General is helpful to help you work out how many weeks’ breathing space you could have. A relatively small amount of money saved each month can give significant peace of mind.

4) I want to save for the future

Maybe 2019 was the year you became a parent, or a grandparent and want to start a fund to help them in the future. Maybe you have inherited a significant amount and are wondering how best to invest it. Perhaps you are just looking at your bank account and wondering how to make your money work a little harder. There is a staggering array of savings and investment products on the market. We can help tailor investments to your own needs.

Whatever your financial resolutions we are best placed to give you totally independent advice which focusses on you and your needs. Take a look at the comments of our clients and let us see if we can help you.

Get in touch

We can help you keep your 2020 financial resolutions. Book an appointment by calling us on 01543 410512.

We do not ask for a fee for an initial meeting, where we can meet to check whether we can offer what you need. Any business that we conduct on your behalf will be subject to a fee. We will always advise you of the fee up front before we start any work for you.

Financial planning when going through a divorce

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Divorce is stressful. We can at least help in taking part of that stress away for you.

Sometimes our services are needed most when our clients are going through a stressful change in their lives. Recently Paula has been advising several clients who are going through the divorce process, working with them and their solicitor. Here she offers some key financial issues to think about when you are going through a divorce or separation. She also covers what information you may need to provide for us and your solicitor to advise you appropriately.

Mortgage planning for divorce

If your separation means you need to sell your home – what your solicitor will refer to as the matrimonial home – you will need to consider whether you need a mortgage in order to buy a new property. You will also need to have an idea how much you may need.

In order to help you with this, you will need an idea of what the matrimonial home is worth, the amount of any existing mortgage and an indication of how any equity may be split between you and your ex-partner. Proof of earnings will be needed to help you obtain a new mortgage. You will also need an idea of the value of any property you are looking to buy. We are happy to talk to you about getting a mortgage in principle so you can have that conversation with your solicitor.

Pensions considerations

The value of your pension and your ex partner’s pension will be taken into account with any financial settlement. You will need to supply your solicitor with the Cash Transfer Value of any occupational and private pension schemes. We can obtain that information for you if you wish, to help you to fill in form E.

If you are allocated a pension sharing order as part of the settlement, you will need some idea of where you are going to invest that money. If you have a private pension plan it may make sense to invest it here. We can look at the amounts involved, and consider how close you are to retirement age before we advise you.

You may need to access some capital in the short term for example when you are waiting for your matrimonial home to sell. If you are over 55, you may be able to release a tax free cash sum from your pension pot to help you.

 

We do understand that considering your financial affairs while going through a divorce is stressful. Our aim is to help you consider all the possibilities to help you make the right decisions. We want to ensure the financial aspects of the divorce go as smoothly as possible for you.

If you would like to book an appointment with Paula to discuss any of these issues, please call us on 01543 410512. We do not ask for a fee for an initial meeting, where we can meet to check whether we can offer what you need. Any business that we conduct on your behalf will be subject to a fee. We will always advise you of up front before we start any work for you.

Family Finances – What is the value of a parent ?

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Many of us know someone who has died young, or who has had a serious illness, and this can have a massive impact on family finances.

But how many of us have seriously thought about how long we could pay the bills for if we were unable to work.

It is a simple calculation to look at what you have in savings, and to compare this against your monthly spending.  How long would this last?

This does not only apply to wage earners. Legal and General, in their 2015 Value of a Parent survey, value the domestic work a Mum does each year at £29,535.  For Dad’s it’s £21,601.

If as a parent you were unable to cook, clean or look after the children due to an accident or illness would your family be able to cope financially?

Would one income be enough to pay the bills? Or would you have to give up work to become a carer? State benefits are probably a lot less than you think, and would probably not even cover the bills.  If you have a mortgage could you even end up losing your home?

Did you know you may be able to protect your income in the event of accident or sickness for Less than £5 per week.

That’s less than 2 Starbucks coffees, Less than 2 Pints in the pub, Less than a Friday night take away.

As an example:

A 40 year old male, non-smoker, paying £20 per month could receive a tax free income of nearly £865 per month if unable to work due to accident or sickness (subject to underwriting).

This type of income protection cover is also available for manual workers with accident cover included from day 1

So for less than £5 per week you could have peace of mind that your financial situation would be in order leaving you to concentrate on caring for your family.

Contact us today to discuss your protection needs or any other financial matters, an initial meeting is free of charge.

Quote based on a 40 year old male, payment after 3 month deferred period, assuming acceptance at normal rates. Data correct at 12/11/2015.

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