Pensions are complex and it is important that expert advice is received. Some pensions are ‘high risk’ which means lawyers will strongly advise you to obtain a pension report to ensure that the true value of the pension is known. For example public sector pensions and final salary/defined benefit schemes are likely to be undervalued.
In a recent divorce matter, our Family Law team helped the parties to settle using the collaborative process. The husband wanted to retain his pension and he was happy for his wife to retain the home which she was very keen to do. The home was a small property with a mortgage and they had three grown up children. However when the pension expert prepared the report on behalf of both parties, it showed that the cash value of £277,000 was very low and the value placed on his pension based on benefits accrued to date was over £400,000. The wife had a small pension of her own. The matter was settled on the basis of her retaining the former matrimonial home, a share of her husband’s pension of 35%. The wife also had a small maintenance order until she can take her pension, or until she remarries or cohabits. When she takes her pension she will be able to take 25% tax free which will enable her to pay off her mortgage and have a mortgage free home.
The wife now has some security for her future and the husband still has a good pension. Moving forward he could retire early in which case his pension has an even higher value. The pension expert had advised to offset the capital in the home against part of the husband’s pension.
The process enabled them to retain a reasonably amicable relationship moving forward. The husband had a small amount of capital which would provide a deposit for a home. Help was needed from the pension expert in this case to enable this couple to reach a fair agreement that suited everyone.