Pension Pitfall: act in haste?
Pensions are not the most glamorous subject, and when couples divorce, are often overlooked by the parties. For over twenty years, courts have had the power to share the parties’ pensions on divorce. Research shows the effect of this: in only around 12% of financial orders are pension sharing orders made, and on retirement, the financial position of parties can vary hugely.
Manchester University published research in 2021 setting out the effect of this on women, many of whom sacrificed careers by raising children (see the article). Those years cannot be recovered, and the consequences are significant.
Generalising is fraught with difficulties, but, if possible, experience shows that on divorce, men are more concerned with the preservation of their pensions, women with providing a home for themselves, and often the children. To avoid a “messy divorce” and preserve goodwill, the first casualty can be a pension sharing order.
Equally, an apparent fair agreement can be based on a false premise: comparing the face value of a pension with say the value of a house, can lead to a massive problem. Many pensions require careful consideration to determine the true value of the benefits: the reality is simply not apparent from the headline figure. This can lead to an apple and pears settlement, which is fundamentally flawed and so unfair.
Rushing into a settlement without the right information or analysis will lead to problems later. A clean break order may prevent this issue being revisited and in fact you may not realise the full extent of the problem until later in life.
You may be placed under pressure to agree a settlement and wish to wrap things up quickly and move on. Cliched, but act in haste, repent at leisure is apposite when considering pension sharing orders.
So, what is to be done? First a balanced view and consideration not of the numbers, but the effect of any settlement now and in the future must be made. The short term must not trump your long-term needs. This can be done with our assistance and support. We understand who to speak to, how to balance housing, income and pension needs in a settlement.
If you wish to, please call or email the team.