Pensions in Divorce / State Pension Update01 December 2016
Divorce is always a hugely emotional topic for all involved. It's the ending of an era for some and a new opportunity for others. I have written much on the topic in the past, with my book on the journey of divorce, Addicted to Wedding Cake, which was published in June 2010. The follow up book, Nagged, Tagged & Bagged: Divorce Recovery (March 2011), was a look into what might follow divorce, both good and possibly not so good. Written from too much experience, both were quite cathartic in their release.
Pensions sharing can be complicated and we have spent many hours studying and applying the process in numerous cases. One key issue that is of note and is a recent change is the way that State Pension benefits can be applied. If a Decree Absolute and financial settlement was applied prior to April 2016, then it was possible to swap your National Insurance record for that of your ex-spouse in order to claim a higher State Pension (if that was applicable) at State Pension Age. If you now retire and reach an age to draw your State Pension, this option may no longer be available and could be a significant blow to your planned overall pension income.
This is detailed clearly by The Pensions Advisory Service here:
Remarriage or entering into a civil partnership could change this position, as it notes on the site.
You can check if part of a State Pension (Additional State Pension or Protected Payment) can be shared in divorce proceedings by completing a BR20 form from the DWP. Last updated in May 2016, this very useful and clearly detailed form can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/526327/br20.pdf
As also noted at the top of the Pensions Advisory Service website post, the rules changed in this new tax year (2016/2017). There is not much coverage of this in the press; however, as this recent article from the Telegraph notes, this usually applied to the home-maker who had stayed at home to look after the family. The article is here: http://www.telegraph.co.uk/pensions-retirement/financial-planning/divorced-you-could-face-a-drastic-cut-in-your-state-pension
Financially, there is much to consider when getting divorced to provide you with a future that is bearable or more. The State Pension may be the last thing on your mind, but is likely to be important in the future. More on the State Pension can be found here: https://www.gov.uk/state-pension/overview
If you want to see more on the two divorce books noted at the beginning of this blog, then these can be found here:
If you need some advice with your financial planning in divorce then please contact me at the Guildford office. We do not provide legal advice and this should be sought from a suitable legal adviser. If you do not have your own contact, we would be happy to make a recommendation. No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner