Pension Reforms- Increase Options & Flexibility On Divorce


New pension reforms introduced in the UK from the 6th April this year have given some pension holders greater freedom over how they spend, save or invest their pension pot. Whilst the headlines have been quick to predict that many people are set to blow the lot, little consideration has been given to the impact the reforms will have on an important area which so far has been overlooked: separation and divorce.

More often than not the assets of greatest value are the family home and pensions, and in many cases one or both parties may be keen to hold on to the family home, particularly where there are children involved. Often, a settlement will be agreed using a combination of off-setting the various assets and pension sharing.

For couples who are going through the Collaborative Law process who are already 55 or over, or those close to 55, will find that they can use the Pension reforms to provide them with greater flexibility and open up alternative settlement options that more closely match their individual financial planning needs.

For example, we regularly find that, during a divorce, each spouse is keen to ensure that they can each afford a home of their own following settlement. With the changes allowing individuals the option to release funds from a pension pot early, it may help relieve the financial burden of finding the deposit for a new property.

For those not quite in the age range to benefit from the changes straight away, it may make them more comfortable with the prospect of taking on a greater mortgage burden now, in the knowledge that they can access funds from their pension at a later date to reduce that mortgage, without having to wait until retirement.

Whilst we acknowledge that an individual's pension is there primarily to provide an income in retirement, the new pension changes do provide people with greater flexibility in terms of their finances, which in turn can result in divorce lawyers being more creative in constructing settlement proposals.

Divorce is a complicated area and where pensions are involved, the need for specialist legal and financial advice from the outset is even greater. The family law group, Resolution, recognise the need for financial experts and have in place an accreditation standard that Financial Advisers have to obtain. Resolution Accredited Advisers can help in the Collaborative Law process and empower couples with the knowledge required to achieve a settlement that is not only fair but suit each party's changed circumstances both now and in the future.