Significance of pensions in high net worth divorce - Marcia Mediation

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Private pension pots in high net worth divorces could be worth more than twice as much as the divorcing couple’s disposable income and 50% more than their property assets, according to research published earlier this year.

The study of ONS data by financial planning specialists Succession Wealth divided divorcing couples’ money and assets into four categories: Financial, Property, Physical and Private Pension Wealth.

Among couples worth over £1 million, the analysis found that private pensions account for the largest share of the estate at about 43% of the total, an average of more than £1.5 million per couple.

This compares with just over £1 million in property wealth, £700,000 in financial wealth and a further £186,000 in other physical possessions.

It’s an important reminder that pension pots should not be forgotten when negotiating a divorce settlement, especially in couples where one partner might have substantial private or workplace pension savings while the other has little to none.

Mediators can help you to negotiate a fair share of one-sided pension pots so that neither party is significantly disadvantaged once you reach retirement age.

Why do pensions matter in divorce?

A divorce settlement is a way to make sure that both parties can expect a fair and equivalent future lifestyle and nobody is driven into hardship.

Over the short term, dividing the family finances and assets can achieve this – it might mean one party buying out a share of the family home, while the other moves out and rents or buys a second property.

But at retirement, many divorcees are finding that they did not negotiate a share of their partner’s pension and therefore have a much smaller retirement income.

If pensions are factored into the divorce, an appropriate arrangement can be made to ensure that both parties continue to have comparable quality of life during their retirement.

Age UK have been campaigning on this throughout 2019 and while the last-minute general election has put a stop to no-fault divorce legislation for now, awareness of pensions in divorce proceedings is one of the year’s trends that can continue despite the election.

This is an important issue for any divorcing couple with a significant imbalance in pension savings, and especially for those divorcing later in life when retirement income is likely to be called upon within the next few years.


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