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.
Pension sharing: what is it and how we can help
/0 Comments/in Retirement Savings /by AdminWhen 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.
What is ethical investing and is it right for you?
/0 Comments/in General /by AdminAre you interested in the idea of using your money to change the world for the better via ethical investing? Since the pandemic and with climate change high on the news agenda more and more people are looking at the ethical aspects of their investments. It is something we are discussing more frequently with clients. Here are a few of the questions our clients have been asking:
What is ethical investing?
Ethical investing is an overall term for an approach to investing where we consider the values of the businesses we are investing in, as well as the financial return we may achieve. You may hear the term ESG – which stands for environmental, social and governance factors.
Environmental factors might include the business’ energy consumption or their policy on climate change. Social factors could include their track record on workers rights, equality and diversity or the gender pay gap. Governance issues are about the way the company is run, such as whether they are open and clear on their finances.
It is important to remember that there is no standard industry definition of an “ethical fund”. For this reason we do need to look behind the headlines and the marketing brochures to find out exactly what individual financial institutions mean when they talk about ethical funds.
How easy is it to invest in ethical funds?
Many financial institutions are realising that customers are interested in these issues and are responding to demand. Fund managers are asking more questions around the ethical standpoint of the companies they invest in. Many funds now include considering ESG factors as part of their decision-making process. Some institutions offer specific “Ethical or ESG funds.”
Will I get the same level of return as a standard fund?
There has been some suggestion that ethical funds may perform better than tradition funds but as with all investing, ethical funds involve risk. The value of ESG funds could always go down as well as up and you could get back less than you put in.
Can I choose not to invest in particular companies where I disagree with their ethics?
Yes, you can often opt not to invest in companies or sectors that you disagree with, for example tobacco companies. This is known as divestment.
What are my other options for ethical investing?
Instead of ‘avoidance’ ethical investing you might want to consider what we would term ‘impact’ investing. Here you might invest into something you do not like (or into a fund that does this for you more specifically) with the aim of making improvements.
As an analogy, if you object to factory farming you might stop buying intensively raised chicken. This just means there will be less chickens, but no incentive to change. Conversely, if you buy a free range chicken you are positively encouraging a change to practices with how you spend.
Are there any other advantages to ethical investing?
There is a suggestion that companies that do well in ESG analysis tend to be overall better managed companies. And that companies and sectors that are developing new technologies, for example in response to climate change concerns, are likely to be growing which would make for a good investment.
How can I find out more about the ethics of the funds my pension is invested in?
You may already be invested in an ethical fund – or it may be very easy to make the change to one. This will depend on your pension provider. If you are interested in ensuring your funds are invested ethically, book an appointment by calling 01543 410512.
What do I need to know before I access my private pension? FREE guide
/0 Comments/in Retirement Savings /by AdminWhen we are working with private pension clients, very many of the conversations we have are not actually about money at all! We believe very firmly that your pension is the thing that will help you achieve the lifestyle you want later in life, and the clearer you can be on that lifestyle, the better your planning will be.
So we’ve thought it would be useful to create a free guide to the 4 questions to ask before you consider accessing your private pension. No maths, no numbers, just some of the things we talk through with our clients when we are helping them make big decisions.
To book a pensions review with us, call on 01543 410512.
Peace of mind for our clients
/0 Comments/in Retirement Savings /by AdminWhen we work with clients we know that helping them with their financial situation is about more than just money. Having finances in order enables clients to achieve their goals, whatever they are. They can support their families and have the peace of mind to be able to focus on other things.
We were really pleased to be able to support a lady who has been a client for about 5 years.
She has had a very challenging year. She was diagnosed with a serious illness and needed to spend significant amounts of time in hospital.
We manage her pension and were pleased to be able to tell her that it has grown by over £30,000 in the last twelve months. To use her own words, she knew that her pension was one of the things she did not need to worry about. She knew she could concentrate on her health and recovery in the coming year.
If you would like us to help you achieve financial peace of mind please get in touch.
An update on pension changes
/0 Comments/in Retirement Savings /by AdminThe pension market is ever changing, and this year has seen more changes than most as the Covid-19 pandemic affects the financial services industry. Here is an update on some key changes to help you plan your pension arrangements.
Has my pension changed in value?
At the start of lockdown, stock markets fell considerably and while they have regained much of their value pre-March, they are likely to remain volatile for a while. Pension funds are often mainly invested in stock markets, so these fluctuations can impact directly on the value of pension funds. If you track the value of your pension closely, you may have seen sharp changes in your fund this year, and you may be concerned about its value.
Do I need to change my pension?
As a general guide, if you have many years to go before you retire, we would advise that you don’t need to take specific action. Pensions are a long-term investment and over the life time of your investment, this is a short-term fluctuation. Markets should hopefully recover any short-term losses over time, and markets have already risen strongly since the falls in March.
Do you have a plan?
We always discuss with clients their long-term plan aims. This should not just be ‘I want as much money as possible’, a proper plan should have a proper aim to be meaningful. You may want to retire early, but why? This could be to spend more time with your grandchildren, or to go travelling, for example. Having a deliberate aim in mind should help you to plan more effectively in the meantime. Don’t let short term fluctuations or changes derail your plan, but let us help you achieve it with you.
If your pension isn’t being managed speak to us and we will be able to make specific recommendations based on:
– Your aims
– The length of time you have before you retire
– The amount you have in your pension pot
– Whether your funds are invested appropriately for you personally
– How much you need to save
(The state pension is unaffected by fluctuations to the stock market.)
Minimum age for drawing a personal pension
The government recently confirmed again that the minimum age for drawing a personal pension in the UK is to rise to 57. Currently savers who pay into a personal pension can access their money at 55. This comes as no surprise as the minimum pension age was set to be 10 years below state retirement age – currently 67.
We have no timetable for this legislation yet, but if you would like to understand the potential impact, please give us a call.
Changes to pension tax relief
We mentioned in February that we were anticipating changes in pension tax relief for higher rate tax payers. This change didn’t take place in the Spring budget. However after the financial impact of Covid-19 the government will be looking to ways to balance the books. One way or another they will have to raise a large amount of money in the future.
Many industry commentators are once again speculating that this change will be announced. If you are a higher rate tax payer, talk to us about the most efficient way to save for your future. Please get in touch and arrange a meeting with one of our independent financial advisers.
Case study: Drawing funds from an occupational pension
/0 Comments/in Retirement Savings /by AdminThe client
Our client approached us as she had received a pre-retirement pack from an old company occupational pension scheme, from a well known high street name.
This was for a relatively small plan value, and the pension offered was only £70 a year. Our client asked if we could arrange for her to draw the whole fund as cash. Alternatively she wondered if we could transfer the fund to add to her existing sizeable pension benefits that we manage.
Our solution: drawing funds from an occupational pension
We examined the data and advised that it was in her best interests to draw the fund. There was quite a sizeable penalty on making a transfer, but not on drawing the funds directly from the scheme. The latter option was clearly preferable. The transfer would only be a last resort.
The retirement paperwork gave options for drawing the fund as a one-off payment under the triviality rules. However our client did not qualify to use these as her overall pension savings were too high.
We therefore considered drawing the benefits under the small pot rules, where you can draw plans of up to £10,000 as one off payments. There are various versions of these rules depending on the type of scheme, but they are quite straightforward for occupational schemes.
The challenge: changing the rules
There was no option for this in the paperwork, so we contacted the scheme administrators to ask for this.
The administrators confirmed our understanding that we could use these rules, but they then advised that the scheme have chosen not to adopt the rules that actually allow this. They also advised that they thought the scheme had a lot of members in a similar situation, with small pots, who would probably prefer, or have preferred, to draw the funds as cash.
We thought this was worth challenging, as it would actually cost our client quite a sum of money if she transferred her benefits instead. We drafted a letter for her to send to the scheme trustees to ask them to change their stance.
The occupational pension administrators then advised us that they had reviewed our data. As a result they chose to adopt the rules which would benefit our client.
This decision meant our client was better off. But crucially it also opened up this option for other members of the scheme.
Please note though, drawing a cash payment rather than a pension is often not the right choice. Advice is important, as shown by this case, where we were able to provide an option our client would have not known was even available.
Case study: Mortgage advice at the end of product life
/0 Comments/in Mortgages /by AdminThe client
One of our long-standing clients approached us for mortgage advice as his product was ending. He was looking to take out a new 5-year fixed rate product.
Our solution: mortgage advice
We reviewed his options, and looked at suitable products from a number of lenders. The best option for him was to take an offer from his existing high street lender. Our client spoke to the lender, and was offered a competitive rate.
The challenge: changes in rates
A few weeks later we went to apply for this, to find the rate had increased. The client was happy to go ahead with this, but we could see no reason for the change. We therefore suggested he should wait whilst we did a little more digging.
On checking the numbers we found that his loan to value was just under the 80% mark. However on checking the rates we found the rate he was being offered was for loans over 80%. It was possible the lender had changed their recorded property value, but this seemed unlikely.
After much pondering we came up with a possible answer. As the lender charges daily interest, then this is added to the loan every day. This could mean that during the month then he could be pushed over the 80% threshold, and by waiting until his monthly payment was paid, then the original products would become available again. We therefore suggested waiting until the start of the next month, and then re-apply for the product change.
We did this, and were offered the original rate. By waiting a few days and working with us the client saved £1,525.80 over the next 5 years. Had the client gone direct to the lenders website and applied himself he could have ended up with the wrong product without realising.
Financial resilience: how would you cope with a life changing event?
/0 Comments/in General /by AdminAccording to Scottish Widows, in the UK up to six million people each year suffer a life changing event that causes a sudden loss of income. Many more experience events that cause a sudden rise in outgoings. Examples include:
Many of these events happen without warning, leaving individuals with little or no choice but to face them, but the impact can be substantial. The inability to pay essential bills and meet mortgage payments can lead to huge financial stress.
While many people have faced these challenges this year, the government support has enabled the majority to continue meeting their financial obligations. However, in more normal times, individuals need to find their own way through the new situation, coping with the stress of the event as well as the financial impact.
The ability to cope financially when faced with a sudden fall in income or unavoidable rise in costs is known as financial resilience. Not everyone has the financial resources to cope if they are unable to work. A poll of more than 2,000 adults by Zurich UK suggests as many as one in eight would have to sell their home to make ends meet if that ever happened. In the survey a third of respondents said they did not feel financially resilient.
How would you cope?
When asked how they would cope with a sudden significant loss of income:
These are all major decisions, and have a significant impact on you as well your partner and any family. Being financially resilient can and does help cushion the blow of these income shocks.
How can a financial adviser help?
Working with a financial adviser can help you look at alternate ways to cope with the impact of a life changing event or a major financial blow on your existing income. We take a long-term view with you, and take time to understand your financial situation, including the levels of savings or other financial support you have access to. We can then look at ways to protect your income that can help you in times of sudden change, to protect you and your family.
When you decide to insure your income, or your life, what you are really insuring is the financial stability of yourself and your loved ones. There are many options to explore depending on your circumstances and priorities, and it is our job as independent advisors to guide you through to achieve financial resilience for you and your family.
3 financial steps to take to protect the important things in life
/0 Comments/in Mortgages, Retirement Savings /by AdminIn 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.
Reduced Office Hours
/0 Comments/in Uncategorised /by AdminDue to the current ongoing situation with Covid-19, we are reducing office opening hours. The office will now be open from 9am until 2pm.
If you have any queries outside of these hours, please leave us a message on the answerphone, or email enquiries@acuityfinancial.co.uk, and we will respond as soon as possible.
We hope all our clients are keeping safe and well during these unprecedented times.