It’s no surprise that more and more separating couples are tempted to try their hand at the ‘DIY divorce’. Who wouldn’t want to try to save time and money right? Whilst doing things yourself may seem appealing, unfortunately this worrying trend isn’t as simple as it might appear to be.
We’re not suggesting that couples can’t have an amicable divorce. But what we are saying is that this should never come at the expense of a fair and informed outcome. One that not only provides you with a suitable house and sufficient income now, but which also gives you security for your retirement. Wherever there are assets involved, such as houses, cash and pensions or a big disparity between incomes, there are likely to be bumps in the road and protections you would benefit from. Where these are overlooked, it can only result in more time and money being spent trying to undo the damage.
Here we’re taking a look at the pitfalls of the DIY divorce and pensions, and why it always pays to seek legal advice.
Overlooking the pension
The UK courts have recently seen a sharp drop in the number of applications for orders in respect of pensions. Applications for pension sharing orders fell by around 35 percent in the four years leading up to 2021, and there’s a risk that separating couples aren’t taking everything into account when seeking a resolution.
There are a number of options when it comes to your pension during divorce, including sharing the pension pot/income or, one spouse retaining more pension in exchange for giving up more of other assets such as equity in property or savings. But how do you know how much is fair for you to get or give up? There may be hidden benefits to the pensions. There may be tax issues. There may be a relevant age gap between you and your spouse. Money now is more valuable than waiting to access money from a pension in retirement.
The issue is of course, that it’s impossible to know what’s best for you and your future without seeking expert legal advice, as every couple’s circumstances are different.
As far as pensions are concerned, there is no one size fits all. However, ignore them at your peril.
Not considering the future
Disregarding your partner’s pension, particularly if you have a much smaller one or don’t have a pension at all, isn’t something we’d recommended without there being a clear plan for building sufficient provision for your retirement.
With some types of pensions, the value given on the statement can be a significant undervalue of the true benefits. This is often the case with public sector final salary schemes. Sometimes their real value can be three times the figure given! Even if you don’t want a share of your spouse’s pension, it can pay to understand its true value so that you make sure your share of the other assets accounts for this. We’ve helped many people who believed they would have to sacrifice getting a share of their spouse’s pension to retain the family home when in fact they were able to retain the family home and receive a share of the pension.
Pensions are an incredibly complex area of family law and deciding what to do about them isn’t something to be tackled alone. Without legal advice, you risk never knowing whether you made the right decision, and in turn, your future financial security.
The gender gap
Whilst inroads are being made to address the gender pay gap, the fact remains that women are typically more at risk than men of an uncertain financial future. For many women, taking career breaks to raise children during their marriage can affect their employability within the job market and leave them with a smaller, or nonexistent, pension pot.
The average woman’s pension is around £12,000 when compared with the average man’s at £26,000. That’s less than half. For all the seemingly attractive benefits of a DIY divorce, with such a colossal gap in pension value between men and women, thinking beyond the here and now is absolutely vital.
At Harrogate Family Law, we’re always here to protect our clients’ best interests. We know how easy it is to overlook your pension, but our team has years of experience and expertise when it comes to protecting your future.
Call us today for a friendly chat about your options.