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Pensions & Divorce

This is a tricky area but in many cases peoples pensions are their second largest asset after their home and so they really do need to be addressed properly in any settlement process.

Since the Welfare Reform and Pensions Act 1999 brought in the option of Pension Sharing On Divorce from December 2000 what is mostly advised it to attempt a ‘clean break’ settlement for pension funds on divorce. Offsetting and earmarking will still be options to consider but a new option was introduced which allows the pension benefits to be shared or split between the parties at the time of the divorce.

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Offsetting simply means that the pension funds are valued, and the spouse with greater benefits provides the other spouse with additional funds elsewhere in the settlement, to compensate them for the loss in pension rights.  Earmarking applies to all private pensions (including those in payment), but not state benefits.  It involves the court issuing an attachment order to the pension scheme. This attachment requires the scheme’s trustees to pay a proportion of the member’s benefits directly to the ex-spouse, when the benefits are taken.

Pension sharing applies to all pensions, apart from the state basic old age pension so the pension benefits are valued and the share can be granted by way of a transfer to the petitioner’s own scheme. One of the biggest problems with pension sharing is the cost. Schemes are entitled to charge for the calculations and administration involved in the splitting of the benefits. Enable’s IFA’s of Bishop’s Stortford can help talk through any of your pension issues.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

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