Divorce and pensions

[Gotoitgirl]

Does anyone know how assets are divided?
My H and I are almost 60. We are on the verge of splitting up.
He plans to retire at 62-63 and then maybe work p/t.
Hoe pension pot is over £1m and when he retires he could take the lot ( not very likely) or take an annual amount of around £35K and a lump sum of around £200K.

I am s/e and do not earn enough to support myself meanwhile. I doubt if I could earn enough at my age anyway as an employee.

Would he have to pay me something until the pension kicked in? I assume an settlement would give me some of it after 30 years marriage and 'giving up' my career to look after DCs.

[Greengrow]

If he takes the lot under current pensions law 55% of that £1m goes to the state so don't treat that as £1m cash. There are proposals to change this so it would instead be taxed at 45% not 55% but even so about half is lost if he takes the lot.

Yes if he earns more than you do and what you earn is not enough to keep you he will have either to pay you maintenance until the pension kicks in (and by the way he could choose to carry on working but take the pension at lower rate now and the £200k tax free lump sum although he may prefer to wait until the new pension rules are in force) or a big enough lump sum to but out your financial claims as a "clean break" with no on going maintenance. We had clean break (I earned 10x my children's father so he got more than half the assets but at least I don't have to pay him maintenance).

It is usually best to see a solicitor even if just for an hour of their time to get all the pros and cons, but it seems to me you need to discuss with him what you can both agree (rather than going to court over it). Either there is enough capital perhaps after selling the house that he buys out all your future financial claims with one lump sum OR you do a split of your assets 50/50ish now and he pays you maintenance until he draws his pension and you apply for what is known as a pension sharing order -which earmarks to you half his pension now - in a sense it becomes your fund now. Then that pays out just as it pays out to him in retirement. The £1m pension fund is not regarded as £1m in cash of course in dividing things up because even if he cashed it in he would just get 45% of it under current law as a cash sum IF he has the right to cash it in and secondly because usually he then buys an annuity (unless it is a final salary pension). Annuity rates are very low he might get £5000 for every £100k in the pot so if he takes £200k lump sum £800k might buy him an income of £40k subject to 40% tax (if his other income uses up his 20% tax band). At 65 or whatever he and you will probably also get a state pension which is also taxable of about £150 a week. I am approximating figures here.

What I would so is write on a piece of paper all the assets and debts you both have to work out your net assets. Remember mortgages if any and credit card debts and also value any valuable possessions, cars, jewellery and of course any house if you own one.

Then if half of the net sum is enough fo you to walk away on and live on then that might be the result plus half his pension. He might instead want to buy you out of having to pay half his pension. You will need to do some informed negotiation with him. Also don't assume at nearly 60 you cannot keep earning more I think most of us once children are grown find it easier not harder to earn and a good few women start businesses in their 60s. It can be a good time so hopefully that might be the case for you too. However it does seem likely that he would pay you maintenance until your retirement age which may be 65, that you both draw the pension at 65 under a pension sharing order and that any assets you have like the house are split now 50% or whatever % you both agree.

[Gotoitgirl]

Thanks for that.

I thought the rules around pensions had more or less changed or were about to very soon? Isn't this what all the fuss was about re. 'silly' pensioners spending all their pensions on flash cars etc?

I wasn't aware that he would lose half in tax- are you sure that is right?
Anyway- if that is so, it's a no brainer.

Neither of us qualify for state pension till 66. I have a tiny pension from my former career kick in at 60.

I already do run my own businesses. I've been s/e for many years but partly due to the nature of what I do, it's never been more than a 2nd income of around £15K pa. I'd struggle to increase that simply due to the nature of the work.

He though has a package of over £100K and this will continue until retirement.

I would like to retain the family home but doubt it would be possible. It's worth around £600K - a 50-50 split would buy each of us a 2 up/ 2 down where we are. We have no debts and some savings too.