Division of assets on divorce for retirees

[Photinia]

May I ask a hypothetical question (relevant to my parents)?

Suppose A and B are divorcing after a long (35yr) marriage with two adult children. Suppose A is substantially older than B, but that both are over 65. Suppose the only assets to be shared are liquid.

Should the assets be divided 50/50 according to cash value? Or should some account be taken of the differential annuity rates given the age gap?

It's not actually that simple, as a good proportion of the assets are pension funds and an occupational pension in DF's (that is, A's) name. I'm wondering if my DM should be getting quite a lot more of the cash and/or some of the income. They aren't (as far as I am aware) actually divorcing, which means that the issue won't be forced unless I rock the boat.

Are any of the following relevant?

• DM hasn't been in paid employment since marrying, which coincided with first viable pregnancy (me!).
• DF brought more assets to the marriage, was the higher earner even before DM gave up work, and inherited money during the marriage.
• DF retired (early) c.20 years ago. Oldest child turned 18 c.15 years ago. DM remained non-earning.

The starting point with all marital assets, liquid or otherwise, is a 50/50 split. Does not depemd on relative contribitions. Couples are encouraged to mediate on any specific details that might change that. So in your example the couple might agree a slightly different split to take into account their age, future income potential, setting up a home etc. But they would be well advised to start by talking to a solicitor each and establishing what would be fair before they began mediation

Thanks, Cogito. That's sort of what I thought.

How does one go about giving someone else one's pension income? Are we looking at spousal maintenance (he gets the income and gives it to her), or is there a way of transferring the benefit of the pensions so it pays directly to her? There is at least one occupational pension (being drawn), and several other pots which have not been drawn down. I don't know how much is there, but given their lifestyle I can guess a lower bound.

The current split (imposed by DF) is that DM has all the liquid assets bar a sensible amount to house him. He has all the pensions (which are all in his name). If she buys a similarly priced house, keeps a sensible rainy day fund, then buys annuities with the remaining cash, I suspect she ends up with a substantially lower income than him (the difference would be a lot less if she were the same age as DF, hence my original question).

She's not in the country; he's making offers on flats. So I think my immediate course of action must be to prevent him from overspending on a flat. Then when she gets back to the UK, get her to a solicitor. But that's straying into Relationships territory!

You need proper legal advice. I'm not a solicitor. However, my experience is that all the assets are put in the pot and then mediation is designed to determine how best to distribute it in a practical sense. So someone might take a larger share of a property's value in exchange for dropping their future claim to an investment, for example. After a long marriage when there are significant assets it's not going to be a simple task to reach a fair (crucial word) settlement. Can't just be cobbled together.

I'm also not a solicitor but in final stages of divorce. Other point to be taken into consideration is that women tend to live longer. My solicitor said it is therefore now well accepted that a 50 50 split of pension CETV is not fair to women, and one should be looking to division relative to outcomes. I found a joint commissioned report from a pensions actuary v helpful in our decisionmaking.

Yes you can split a pension but it depends on the type of pension as to how this is achieved. A CETV is only for a defined benefit pension and it can be argued that a CETV is not 'fair' value, let alone the division. A money purchase fund (occupational or otherwise) is more easily split, be that 50/50 or otherwise. If the pensions are crystallised then this changes the options too. You need a solicitor with a good financial adviser contact.

I also thought marital assets were split equally. After such a long time together I think each of the couple should have roughly the same income in retirement. I'd also be wary of accepting all assets in cash as a lot of older people have been left high and dry as their savings dwindle and interest rates are low. Whereas a lot of pensions usually do rise with the rate of inflation once taken out. But that depends on the type of pension.