Pension could be the biggest single asset

WHAT is likely to be a divorcing couple’s most valuable asset? The family home will spring to most people’s minds first. But the value of a pension could well be the biggest single asset in the relationship.

When and how pensions are divided on divorce depends on the circumstances of you and your family. If your marriage has been short and both of you are in your twenties or thirties, then your pensions may not need to be divided formally at all, although their value may still be taken into account in other ways.

If you and your partner are in your 50s, pensions are likely to play a far more central part in your negotiations or the decision a court has to make.

It will be necessary to look at them within the overall context of your family finances. New research shows that a fifth of people with pensions in the UK have no idea who will inherit their pension pot when they die.

Surprisingly, 17 per cent of divorcees don’t know who stands to inherit their pension, even though this could be their ex-partner. This figure rises to 28% among people who are separated from their partner.

Of those who were formerly in a relationship that has since broken down, just 24 per cent say they updated their pension policy immediately, while half said they had no idea they needed to update their personal information.

A further 16 per cent did eventually update their policy, but waited for over three months to do so, with men more likely to update a pension policy when a relationship ends.

Co-habitees are also leaving themselves exposed, as there is no guarantee a partner would receive pension savings if they are not named as a beneficiary on the policy. Over a quarter of co-habitees are unsure who will inherit their pension if the worst were to happen.

Tips for staying on top of your finances

1. Make sure you know who stands to inherit your pension pot when you die

2. If you are co-habiting, many pension policies will require you to name that person on your policy as the beneficiary upon your death

3. Periodically check all finances, including pension pots, bank accounts and insurance schemes, and ensure the right beneficiaries are named.

Obtaining the right professional financial advice is vital in the event of a divorce. Often, pensions aren’t even considered in the divorce discussions. But the older you get, the bigger the size of your pension, so it may not be that dissimilar to the value of your property.

Information based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Tax treatment is based on circumstances and may be subject to change in the future.

Although endeavours have been made to provide accurate and timely information, we cannot guarantee that such information is accurate as of the date it is received or that it will continue.

No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation.