Divorced people don’t forget about retirement – lexology

Weak, forgetful woman? I don’t, and so Imogen Tew’s (FT Personal Finance (22/10)) report on women receiving equitable divorce pensions calls for a post.

Apparently, St. James’s Place had determined through an FOI request (from whom?) that between 2016 and September 2021, fewer than one in seven consent orders in which the parties either negotiated their financial entitlements in the divorce themselves or with legal input, contained an order split or division or the earmarking of a pension scheme. Only 80,290 out of 602,491 – just over 13% – agreed to such an order. This was in contrast to “about 40%” – i.e. about 240,996, who also obtained such orders, but did so in the contested proceedings. So the couple went to court and argued over finances and a judge issued a decision.

First, the headline “Divorced Forget Retirement” couldn’t have been more misleading and less helpful to those worried they missed a trick or should have gotten something they didn’t have. No one who ends their marriage, male or female, employed or doing household chores while married, “forgets” about retirement. Most worry about how to make ends meet after the breakup — how to move, pay the bills, raise the kids, save for the future, and plan for their retirement. The idea that women, who actually have smaller pension pots because they were not the higher or continuous earners in the marriage, are “forgetting” about their retirement is offensive.

Second, and for reassurance, since 1973 the court (which ultimately authorizes any financial outcome between the parties, whether by agreement, through mediation or arbitration, or at the end of a contested hearing) has had to consider the needs of both parties and all resources in the family (including pensions). ) and share them fairly. It’s an arbitrary balancing act. Judges also don’t “forget” the retirement of divorcing wives, but immediate housing and income take precedence.

Orders are neither agreed nor imposed without both parties and a judge understanding “what” is to be shared – including pensions or how people will live in their retirement. A great deal of time and effort is expended in understanding the present value of an annuity or what it might bring at retirement date given the parties’ age and tax status and state pensions. Some pensions cannot be divided by an English court anyway. Often, annuity actuaries must be hired to calculate what percentage split could result in equal income in retirement.

The article mentioned other options, including earmarking (receiving income from the other spouse’s pension pot when they retire, rather than a share of the pension if an amount is debited from their pension and credited to the seeking spouse’s pension pot) and “offsetting” ( a person may have more than one other type of asset – often the entire marital home until the youngest child leaves school when they are expected to move to a smaller home to free up funding for their retirement), but no FOI- Inquiry was able to demonstrate why certain financial arrangements were made.

The parties, their advisors and ultimately the court will always consider whether the deal or decision is legally fair, and that includes considering where the parties will remain after retirement.

Retirement may not be that big of an issue for those under 40, especially as retirement ages rise and many people who are getting divorced need to use their retirement resources in creative ways to free up cash for more immediate needs rather than plan for their future.

Third, this article should not encourage spouses to fight pension disputes in court. There is widespread support from the Government and Sir Andrew McFarlane, the head of the court’s family division, to ensure that spouses do not rush to court to fight over money. Mediation, arbitration, cooperative approaches, all leading to an injunction, are quicker and cheaper than litigation and involve pension and retirement considerations. Less conflict in the family also leads to better outcomes for the children.

All parties to a divorce should have access to good legal and financial advice in order to make informed decisions about their financial future.

Forget fear and face the future.

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