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10/08/2012 By: Katherine Kennedy
When it comes to sorting out your finances as part of your divorce settlement, it can be difficult to appreciate that specialist pensions advice – over and above that provided by your lawyer – may be worth the additional expense. However, reviewing your pension sharing options properly is a crucial part of weighing up what you and your family need in the immediate future versus the longer term considerations.
A key question to discuss with your lawyer is whether you would benefit from getting a pension report prepared for you. Divorcing partners have the option to share one party’s pension between them, with a percentage of the pension being transferred to the other spouse. A pension report can set out more clearly for you what income each of you is likely to get upon retirement from any pension accrued during your marriage and how that can be equalised between you.
A report can also help to evaluate the true value of pensions and advise what sort of cash sum would be fair for one of you to receive now – if that’s what you prefer – instead of keeping a stake in the pension. A pension is a future income stream. A notional value is attached to it, called the cash value. However, this is not always a fair reflection of the value of the pension. It may also be that one of you would actually prefer to keep more liquid capital, perhaps to help with moving to a new home, rather than retain a pension that can only be claimed as future income.
When a divorce case is settled, there are invariably a number of competing considerations that may distract people from getting a pension sharing report: the risks of ongoing litigation versus the certainty of settling; an end to the emotional and financial costs of what may otherwise be lengthy proceedings with an unpredictable outcome; the attraction of more tangible assets over a less tangible future income stream or the desire to move on with your lives, among many other concerns. But it is well worth considering carefully with your lawyer the pros and cons of getting a pension report so that you can be sure you’re making an informed decision about pensions.
For further information about issues like this, see the finances and pensions on divorce sections of this site.