SPLIT DECISIONS
DIVORCE SAVVY, SAYS
FOR RICHER, FOR POORER, IT’S TIME TO GET
HARVEY
DIVORCE laws changed this month allowing couples to separate without blaming each other for the breakdown of their marriage.
Lawyers say the new “no-fault divorce” system will be kinder to couples and their children, as pinning blame on one partner made splitting more acrimonious.
The reforms are the biggest shake-up in 50 years, and should also make the system in England and Wales cheaper, quicker and simpler. Yet legal experts say it will not eliminate disputes over splitting financial assets, and women must make sure they get their fair share of any pension, says April Ritchie, senior wealth management consultant at Mattioli Woods.
“Pensions are often forgotten yet they can often be worth more than the family home.”
There are three key ways to deal with pension splitting during a divorce in England, Wales and Northern Ireland.
Married couples and civil partners can choose to “offset” the value of any pensions against other assets, such as property.
Alternatively, they can divide them for a clean break, known as pension sharing.
The final option is “earmarking”, where a chunk of one partner’s pension pot is set aside to be paid later.
This can be risky as the former spouse could lose income if they remarry, or the pension holder dies. In Scotland, only the value of the pensions you have both built up during your marriage or civil partnership will be considered. Anything before you married or after you separated does not count. In England, Wales and Northern Ireland, the total value of the pensions you have each built up is taken into account. In both cases, the state pension is excluded. Couples should also consider separate legal and financial advice to make sure that both get a fair settlement, says Menna Cule, financial planner at wealth manager Brewin Dolphin.
“A financial adviser can help you draw up a list of assets, including property, pension pots, investments, and a list of your joint and individual outgoings. That way, your legal advice is based on accurate information.”
Menna advises to cancel any financial commitments in joint names too.
“These include credit cards, joint accounts, personal loans and even overdrafts. Then set up afresh in your own name.”
Life will be very different once divorce is complete.
“Most people know when a relationship is coming to an end, so start saving and planning for it. This is especially important for the partner who may have been more financially submissive and doesn’t know what their outgoings might be.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says beware running up debts during the split.
“If you’re both named on the mortgage, then you’re both liable for the full amount, so try to maincalled tain payments in the short term.”
If your ex refuses to pay their share, or you’re struggling to pay yours, talk to the mortgage company, which may let you service the interest only for a period.
If your wages and any other income are paid direct into a joint account, arrange for it to be paid elsewhere, Sarah adds.
“If bills, rent, or the mortgage come out of the joint account, arrange an alternative way of paying them.”
Stop fighting with your ex if you can, she advises. You don’t have to stay friends, but the more you can reasonably agree on, the less you’ll spend on lawyers.
“Each niggle will cost a fortune in legal fees, but don’t let them bully you into a poorer deal.”
Start rebuilding your life as soon as possible, Sarah says. “If you have run up debts or spent your emergency savings during the divorce, make paying them off and building up a cash safety net your priorities.”
If you’re relying on maintenance payments, you need to insure the life of the person paying them, to protect your family from all eventualities, she adds.
The blame game may be over, but that won’t help if couples still end up accusing each other of messing up each other’s finances.
A financial adviser can help you draw up a list of assets, including property, pension pots, investments, and a list of your joint and individual outgoings. That way, your legal advice is based on accurate information
Menna Cule of Brewin Dolphin