Active discussions

Meet the Other Phone. Flexible and made to last.

Meet the Other Phone.
Flexible and made to last.

Buy now

Please or to access all these features

Talk
Divorce/separation

Here you'll find divorce help and support from other Mners. For legal advice, you may find Advice Now guides useful.

Original poster

Pensions and divorce?

33 replies

Mumof3confused · 17/12/2021 12:48

I’m thinking of separating with my husband and need to get my ducks in a row. We have an enormous amount of equity in our house but I would rather not sell it if I can help it - would love to keep it for the sake of the children’s stability.

There’s no way I would buy my husband out (of why didn’t I get a prenup signed, I would have been in a great position right now as the deposit was almost all mine).

He does have a final salary pension scheme (teachers pension) and I have no pension savings. I know that pensions are taken into account but how might this play into the shared ‘pot’? I’ve no way of finding out what his pension may be worth without asking him and I’m not at that stage yet.

Is it simply a case of 50:50 entitlement? Ie:
Equity worth £200k
Pension worth £200k
Therefore, if I give up my share of his pension I could trade this for his share of the house?

I can afford to take on our mortgage repayments as it currently stands but I wouldn’t be able to take out any more borrowing in terms of a mortgage based on my salary even though we have about 70% loan to value.

Just want to figure out the likelihood of being able to stay in the family home. He would not be able to buy me out.

OP posts:
languagelover96 · 17/12/2021 12:58

Talk to a financial advisor.

Original poster
Mumof3confused · 17/12/2021 13:02

@languagelover96 of course I will but I can’t get an appointment until January so I was hoping that someone here could help shed some light in the meantime.

OP posts:
ThisIsStartingToBoreMe · 17/12/2021 13:12

How old are the kids? Has the bank agreed to let you have a mortgage?

nomorefrogs · 17/12/2021 13:15

In general terms pensions are treated as being worth less than cash/equity so each £1 of pension is worth 70p if that makes sense. You can offset the pension again at the equity if that is what you both want but how will he house himself? That is what the court will ask

BungleandGeorge · 17/12/2021 13:22

If he can’t access his pension until he’s over 60 that will need to be taken into account. It’s not ‘available’ money in the same way as equity or savings. What money does he have available to house himself?

BungleandGeorge · 17/12/2021 13:23

Prenups aren’t valid in the UK

CorrBlimeyGG · 17/12/2021 13:26

Talk to a solicitor, not a financial advisor.

As Bungle notes, pensions are not treated in the same way as equity, as it is not immediately available, and cannot be cashed out in the same way that a property can.

Think long term as well as short, do you have time to build up your own pension? Would the lender allow you to take over the mortgage?

Original poster
Mumof3confused · 17/12/2021 13:47

@ThisIsStartingToBoreMe primary + secondary school age. I have not approached the bank but based on my income I believe they would let me take over the current mortgage. I can’t imagine the lender would have an issue with me taking over mortgage.

@nomorefrogs ok thanks for that. We have another property with decent equity also, I had imagined he would be able to use that to purchase another.

@CorrBlimeyGG perhaps I would possibly have time to build one up but at the moment I’d like to try and find a way for the children to at least be able to stay where they are if at all possible.

OP posts:
TheTrinity · 17/12/2021 13:50

The 50/50 is always simply the starting point and the needs of your children will be priority. If it's going to be detrimental to your children to have to move house (changing schools etc) then that will be considered. It also depends on what ages you are as well as relative pensions (or not in your case since you don't have one) eg if you are both young then there is in theory time for you to build a pension or simply that you have more working years left than your H if he is older or nearer retirement. You can try to agree not to make a claim on his pension in return for not having to buy him out of his share of your home but that also depends on if he is able to rehouse himself (if he earns enough to rent somewhere adequate to have children stay at least) if he can't buy you out.
Sometimes the numbers just don't work out and it becomes unavoidable to keep the family home. The Judge will have the final say on any agreement and will ensure it is fair.

Viviennemary · 17/12/2021 13:52

I doubt this would be agreeable. A pension pot isn't exactly cash in the bank or even equity in a house. But as you have another property maybe a deal could be done.

comfortablyfrumpy · 17/12/2021 13:54

Also worth noting that final salary schemes aren't as straightforward as taking the CETV... you will probably need a pension expert report before you can work things out more fully.

General guidance seems to be that if pensions over £100k and/or include a final salary scheme then an expert report is required.

Yes, in principle you might be able to trade equity for pension, especially if you're young enough to build up a pension for yourself.

Original poster
Mumof3confused · 17/12/2021 14:21

@TheTrinity He’s on a final salary scheme and we are both the same age, early 40’s.

I was hoping that the house could perhaps somehow be traded against the second property + pension.

I collect the children from school each day and would continue to do so, but assume we would split the rest of the time 50/50 ie they would spend the evening round his from 6pm or whatever time he’s back from work on his days. I’ve no doubt he’ll want to see them as much as possible.

He has only been paying into this pension for 10 years or so, perhaps it has not built up to any significant amounts yet. I would suspect that he would agree that it’s in the children’s best interest to stay in thieve home.

OP posts:
Original poster
Mumof3confused · 17/12/2021 14:21

The second property was sort of my pension….

OP posts:
TheTrinity · 17/12/2021 15:28

Who pays the mortgage on this second property? If he were to sell it, how much would the CGT be? Was there an explicit agreement that it would be your pension? Could he live there? The first thing is to collect all the details of your assets, savings, investments and his pension value. These will be needed when you negotiate your financial agreement anyway. I do not know much at all about final salary pensions but it is crucial you find out how much it is since he has potentially at least 20 years of working life ahead. The little I do know is that these types of pensions tend to be the most generous - someone correct me if I'm wrong. The single example I know about would pay say £30K per year on retirement so if that was for 25 years then that would be worth a very substantial amount. I wouldn't aim to 'give up' or 'trade in' anything yet until you know exactly what there is, then get a really good solicitor to know exactly what you are fairly entitled to and start the negotiations.

Original poster
Mumof3confused · 17/12/2021 15:35

@TheTrinity we rent it out so it provides an income over and above the mortgage interest. CGT will be minimal due to some substantial costs I believe we can offset. He can’t live there, it’s in London and we live outside but he could use the equity to buy locally. The only unknown at the moment is the pension and it is generous as far as I know.

OP posts:
FinallyHere · 17/12/2021 15:53

How are you going to live in old age if you trade in your share of his pension and the house that was going to be your pension?

Sometime, there just isn't enough to allow you to split one household into two while maintaining your standard of living.

BungleandGeorge · 17/12/2021 16:14

You’ll need him to get the pension details but I don’t think it will be anywhere near as generous as you think. It used to be 1/2 of final salary after paying in for 40 years. So after 10 years that would be an 1/8 of final salary. They’ve changed to career average which are less generous and have retirement age of state retirement age and if he’s only paid in for 10 years he may well not have any final salary pension. I believe they charge if you want to split the aymwnts between 2 as well

Mia85 · 17/12/2021 16:24

You can play around with the Teachers' pension calculators to get a rough idea of what he is likely to have build up www.teacherspensions.co.uk/members/calculators/estimate-your-final-pension-value.aspx but as PP have said you are likely to need an expert report and advice to get an accurate picture.

Women often prioritise the family home over pensions in divorce proceedings and that can be a mistake if you don't have a clear idea of how you will suppot yourself in retirement.

Mia85 · 17/12/2021 16:35

You might be interested in this article OP www.thisismoney.co.uk/money/news/article-10038637/The-house-pension-decision-facing-divorcing-couples.html

Original poster
Mumof3confused · 17/12/2021 17:25

Thanks everyone, he has been overpaying into the pension so I don’t think the calculator will be terribly helpful. I’m pretty sure he did have final salary pension, it may have been in place 12 years or perhaps even longer, I can’t remember. Can they change the final salary scheme to something else once started? I’m not too worried right now about my own pension, I do have plans.

OP posts:
TheReluctantPhoenix · 17/12/2021 17:32

It is not that simple.

The value of the pension will depend upon both your ages. As it becomes more cash-like (you approach pensionable age), it is pretty much treated as cash. Before that, it is discounted.

I do question the 'staying in house is for the stability of the children' though. It is nearly always adults who become attached to houses; children are generally far less bothered.

In reality, though, you need to talk to a good solicitor and get your position agreed with advice. Then it is a negotiation within certain parameters.

Mia85 · 17/12/2021 17:37

I’m not too worried right now about my own pension, I do have plans.

Future plans or plans that have an existing value that would be part of the divorce settlement?

If you mean future plans, don't underestimate the value of payments that have been made earlier in life as compared to those made closer to retirement, with less time to compound and the uncertainty of whether it will work out as you intend. I certainly wouldn't discount the importance of the pension situation without having got independent advice.

NB If your husband is in the techers' pension scheme then I think I am right in saying that additional contributions can't be made to the defined benefit scheme. Presumably they're being built up in a separate defined contribution pot.

BungleandGeorge · 17/12/2021 21:53

@Mumof3confused

Thanks everyone, he has been overpaying into the pension so I don’t think the calculator will be terribly helpful. I’m pretty sure he did have final salary pension, it may have been in place 12 years or perhaps even longer, I can’t remember. Can they change the final salary scheme to something else once started? I’m not too worried right now about my own pension, I do have plans.
Yes I think they changed for existing members as well. You both just need to get everything valued and then negotiate. Don’t let it stop you separating though, staying through money worries/ children etc is soul destroying
Feelingoktoday · 18/12/2021 00:28

Yes they do change public sector pensions for existing members. You will need A pensions expert as you can’t take 100% of a public pension scheme. It is paid out like a monthly income.