E.T. The Extra-Terrestrial and your pension (after divorce)
Bear with me as there’s a tenuous link here, but no doubt you’ll end up telling your family, friends and neighbours about it. You may also win the next pub quiz off the back of this crucial knowledge…!
The annual news rolled out at this time of year is that January is traditionally the month where family solicitors receive a significantly higher number of divorce instructions compared to other months during the year. Whether this is indeed fact or fiction, the reality of divorce for all those involved and the implications on the couple’s financial arrangements can be far reaching.
When considering the assets of any marriage or civil partnership, the pension provisions of one or both spouses may be the largest capital asset, behind that of the matrimonial home. Therefore, it is important to know that there is no automatic entitlement to sharing the pension benefits on divorce or dissolution. There is often a belief that marriage or civil partnership automatically entitles each other to half of everything, including each other’s pensions. However, this is simply not the case.
When a marriage or civil partnership ends, courts deal with the pension arrangements in one of 3 ways:
- Pension sharing – This results in a percentage (not a specified amount of money) being transferred from one spouse’s pension into the name of the other spouse. The legal ownership of that amount also transfers across and so can be accessed independently from the former spouse.
- Pension offsetting – The value of the pension is offset against the value of other matrimonial assets such as the home or other property so the pension funds are then left in situ without any further claim.
- Pension earmarking – Under this arrangement, pension payments will be made directly from one spouse’s pension plan to their former spouse or civil partner. On commencement of receiving pension benefits, this would also include any tax free lump sums.
In addition, the Government introduced significant changes in April 2015 to the way in which people can access their pensions. If you divorce or dissolve your civil partnership, then it’s best to seek both legal and financial advice as there are often many options that will require professional guidance.
So, what’s the tenuous link to the 1982 science fiction film? The Director and Producer of E.T The Extra Terrestrial, Steven Spielberg, said his inspiration for the film came from his own childhood when he created an imaginary alien friend after his parent’s divorce who was “a friend who could be the brother I never had and a father that I didn’t feel I had anymore.”
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
The guidance provided within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
Cherry May Financial Planning Ltd is an appointed representative of TenetConnect Limited, which is authorised and regulated by the Financial Conduct Authority. TenetConnect Limited is entered on the Financial Services Register (www.fca.org.uk/register) under reference 149826.
Cherry May Financial Planning Ltd is registered in England and Wales under reference 10260896
Registered office address: Javelin House, Wood Street, Milverton, Taunton, Somerset, TA4 1QU
The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on their website at www.financial-ombudsman.org.uk.