Pensions in Divorce FAQs
If you have a question that is not covered below, please call 01622 238000 for assistance.
As Independent Pension Specialists we pride ourselves on the quality of the research we undertake, the advice we give and the solutions we create for our clients. By working with us you will receive the most appropriate independent advice, taking full account of current pension legislation and the range of pension contracts and retirement planning solutions available.
Remember, having the most suitable pension scheme in place can make a very significant difference to your overall financial well-being in retirement, but only if you take the right action now. We can help guide you through your options and make sure you get the right pension solution for you.
What does the law say about pensions if I am getting divorced?
Since the year 2000, the law insists that pensions are taken fully into account in any divorce settlement.
In order to assist with that process, Courts have the power to issue Pension Sharing Orders, which, just as the term suggests, allows the pension benefits of one party to be transferred to the other as part and parcel of the divorce settlement.
What is a Pension Sharing Order?
When a Court makes a Pension Sharing Order, it may stipulate one of several ways in which pension entitlements may be split between the respective parties:
• Just as the term suggests, this involves splitting shares in the pension between each party.
• The respective shares are either transferred into individual pension schemes or one party joins the other’s existing scheme.
• In this arrangement, the value of any pension scheme is offset against other joint assets of the marriage.
Deferred pension sharing
• If the pension is to be shared but one party is already in retirement and the other remains too young to receive a pension, the latter agrees to take the pension at a later date.
Deferred lump sum
• Similarly, this provides for the payment of a deferred lump sum when the party who has yet to retire eventually retires.
Pensions attachment order
• Once again, this provides for a share of one party’s income or cash lump sum upon that party’s retirement at some future date.
Why do I need independent financial advice on Pension Sharing Orders?
The effect of a Pension Sharing Order may be to grant you a Pension Credit in either a personal or occupational pension scheme belonging to the partner from whom you are getting a divorce.
Typically, this Pension Credit needs to be transferred into a pension scheme of your own.
For this to happen, your spouse’s pension provider needs to know where, into which pension scheme, the transfer value must be credited and this, in turn requires the relevant paperwork confirming compliance with any order of the Court.
Generally, you have no longer than 6 months from the date of the Court’s issue of a Pension Sharing Order into which to finalise all the arrangements for the transfer of your pension rights into a scheme in your own name.
You are likely to be faced with an overwhelming choice of different pension schemes, offered by a myriad of different providers, with a number of selectable options and conditions attached to each option – all of which are likely to have a direct impact on the level of pension you may ultimately receive
This is invariably a long and complicated process with many hurdles along the way. It is therefore essential that specialist independent advice be sought, smoothing the process for you along the way, as well as getting you the best possible pension solution for your needs.
What services do you provide?
We are Independent Financial Advisers and not an insurance company, an investment company or an annuity provider – our specialist advice is on your pension arrangements following a divorce and on pensions and retirement planning-related matters in general.
In order to offer you a complete range of services relating to pensions in divorce, we may provide:
• Independent Financial Advice.
• Pension Specialists.
• Research of the whole market.
• Finding the appropriate product for you.
• Investigating all Pension Transfer options.
• Liaising with legal advisers and scheme administrators.
• Dealing with all the paperwork requirements.
• Arranging the set-up of a new policy.
• Arranging the transfer of funds.
• Providing ongoing monitoring and review of your pension arrangements.
What services don’t you provide?
At Independent Pensions Specialists Ltd, we do not:
• Provide legal advice.
• Receive your money into our bank account.
• Arrange transfers into occupational schemes.
• Deal with total pension values below £100k.
Why do I need advisers?
You should note that many pension providers will not deal direct with members of the public, especially in relation to pension transfers and pensions in divorce as this is seen as highly complex area and requires a special category of approval from the Financial Conduct Authority.
Some companies will only accept applications via properly authorised and regulated advisers such as Independent Pension Specialists Ltd and only on the basis that advice has been provided on the transfer.
Remember that in addition, seeking advice from us will provide you with an additional layer of legal protection that would not be available if you went direct.
What does your initial research cover?
Once we receive your completed initial forms back we will write to the pension schemes concerned in order to obtain up to date information on the benefits and the options open to you. This information will include up to date fund values, implementation procedures, what fees would be payable, if any, to the pension administrators etc.
This process can often take several weeks but is vital in ensuring that the advice we give is both accurate and right for your circumstances and the pension schemes in question.
You can help in this process by sending us copies of any information you may already hold such as a recent valuation, Court papers, Discharge Warranties etc.
What are your fees?
We do not make any charge for the initial assessment and/or face to face meeting/telephone discussion, to determine your objectives and establish whether our services are appropriate for you.
We will agree the fee before commencing any chargeable work on your behalf. Please see Key Facts about our services and costs for more information, including the methods available to pay our fee.
Before you decide on your options for a pension scheme into which the proceeds of Pension Sharing Orders may be received, we provide you with independent and specialist advice, and a written report which sets out all the details including all costs and charges, to help you make an informed decision.
In addition, there may be charges made by your existing pension provider for releasing funds before or after your policy retirement date. Remember that you might be giving up guarantees in any Pension Vesting arrangement and that these are, in a way, also a cost to you if you lose them.
What other costs might there be?
The pension scheme administrators for the scheme on which the Pension Credit has been issued will usually have their own separate set of administration fees for implementing the Court Order.
An Annex to the formal Pension Sharing Order determines who is responsible for paying these fees between the divorcing parties and in what proportion.
It may be possible for such fees to be deducted from the pension transfer value (CETV) but this is not always the case. Sometimes the scheme administrator fees must be paid directly by you and in advance of any implementation.
Will you need to communicate with my Ex?
Generally speaking, the answer is no.
Independent Pension Specialists Ltd becomes involved only when all the financial arrangements have been agreed between the parties and approved by the Court.
Our communications, therefore, are with you, the pension scheme administrators and, if need be, your legal advisers.
Very occasionally it is helpful for us to have authority from your ex-spouse to speak directly with pension scheme administrators – but once the appropriate Court papers have been issued, this is rare.
What is a letter of authorisation and why do you need one?
This is an industry standard letter that is the most efficient way for us to gather the data we need to provide advice. By signing a letter of authorisation you are confirming to the pension company that we are acting on your behalf as your agent and that information can be released to us. We will use this letter to obtain detailed information about the arrangements concerned.
Importantly this letter does not enable us to move or adjust the pension in any way. We cannot arrange the transfer of your arrangements or any of the underlying investments without your further approval to do so.
When will the money be transferred?
A Pension Sharing Order cannot be implemented during divorce proceedings until a Decree Absolute has been granted.
The provider of the Pension Credit is given 6 months in which to implement the Pension Sharing Order, with effect from the date of the Order and the receipt of details from the provider to which the benefits are being transferred.
On occasion, the process may be very lengthy indeed, especially if there is not a good relationship between the divorcing parties and documentation or the payment of fees is withheld.
How long does the process take?
The timescale varies according to a number of factors, such as:
• The stage your divorce has reached.
• The type of scheme to which you have decided to apply the Pension Credit.
• Who the administrators of that scheme are.
• The speed with which the necessary documentation is provided.
• The cooperation – or lack of it – between the divorcing parties.
We need to obtain key information from you about your chosen pension scheme or schemes before we can complete our initial research and analysis, on the basis of which we are able to provide our recommendations to you.
Once you have decided to proceed with our recommendations and we have signed and completed all of the necessary paperwork, it can still take several months for the transfer to complete.
Taking everything into account, some 6 to 12 weeks are required for completion of the exercise once all of the paperwork has been submitted. However, it may take 6 – 12 months to gather the correct Court papers, discharge warranties and values beforehand.
What causes such delay?
Typically delays occur because of is missing or incomplete paperwork – including, documents such as the Decree Absolute, Birth and Marriage Certificates, Court Papers or discharge warranties.
We also find that some pension scheme administrators have very little experience in dealing with pensions in divorce or have inadequate procedures for dealing with them. For example, despite a Court Order having been issued, some administrators may still fail to release information to the recipient of a Pension Credit or to us, as your agent.
Further delays may occur when one of the divorcing parties refuses to co-operate, to return papers, or to pay the necessary implementation fees. Some legal advisers also have very limited knowledge or experience in this field leading to unnecessary delays and frustrations.
We have significant experience in dealing with, and overcoming, such issues.
Can I arrange a Face to Face meeting with you?
Yes, you can. We would arrange a convenient appointment for you to visit our offices in Maidstone, Kent – they are just 3 minutes’ walk away from Maidstone West railway station, or if you are driving, we have a car park at the rear of the building.
Otherwise, all our business is conducted by post, email or telephone and draws on the latest technology where necessary.
If you have a question that is not covered in these FAQs, please call 01622 238000 for assistance.