Pensions Warning as Divorces Rise

Around 10,500 people shared their pension as part of divorce settlements in 2020, research from Salisbury House Wealth shows. The financial adviser said the recent boom in equities has made pensions a highly desirable asset in divorces.

With the value of pensions increasing, they have become an increasingly important asset in divorce settlements, second only to the family home.

If you do receive a spouse’s pension as part of a divorce settlement, it would be wise to make some contributions to your own personal pension rather than using for using it for day-to-day expenditure.

As the value of pensions has surged in recent years it has become much more difficult to use spare cash to buy an ex-spouse out of their share of a pension. This is a major reason for 2020s high number of split pensions in divorces.

There are two different ways that a pension can be shared in a settlement.

Firstly, a Pension Sharing Order will mean a direct transfer between one pension pot and another.

The second, a Pension Attachment Order will mean the pension pot remains in the same hands as before but the income derived from it is split.

But the trend towards DIY divorces, where settlements are undertaken without legal representation, could create problems. This is because agreements made today may be reopened tomorrow if paperwork is filed incorrectly or is incomplete.

Naturally, this is more likely than when professional lawyers are involved in proceedings. The caution expressed is warranted because these DIY divorces accounted for 58 percent of all divorce settlements in 2020/21 according to the Ministry of Justice.

A striking example of the problems that may arise after DIY divorces came in 2016 when a successful green energy entrepreneur was ordered by the Supreme Court to pay his ex-wife £300,000 years after their split.

This was the case because both parties had earlier neglected to waive the right to make more claims against each other. While not so bad for the party receiving £300,000, many may be startled to realise that they may be vulnerable to such claims themselves if they went through a DIY divorce.