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Archive for the ‘Pension Sharing’ Category
Saturday, April 30th, 2011
We understand that a pension might be one of the last things on your mind if you are going through the breakdown of a marriage.
 Although divorce can be an extremely emotional period in your life, there are still some practicalities which need to be taken care of, such as the division of your assets – such as your pension.
There are three ways for pension rights to be split between both parties: pension sharing, pension offsetting, and pension earmarking.
This decision can be made once the judge has considered all assets, which can be a difficult process as a full account of your finances must be delivered to the court. There are reasons why you might opt for each one of the processes available.
Pension sharing is often a popular choice, but which you decide to go for will solely depend on your personal circumstances.
Pension Offsetting
This means that the original owner of the pension rights keeps them, but the other party has the value of the fund offset with other assets. This could include anything from jewellery to property and often involves the family home.
Although this option doesn’t seem too unfair, problems often arise because the value of a pension changes far more frequently than the value of other assets. This usually leads to one party losing out due to the unequal value.
Pension earmarking
This is usually the least popular option, and it involves the judge ordering that one pension provider pay a certain amount to the other party once the pension holder retires. This can lead to difficulties in acrimonious cases as the pension holder keeps control of the retirement date and of how the pension is handled in the meantime.
The rate set by the court is due to be paid to the other party once the pension holder retires. However, if the pension holder passes away before retiring, or if the other party has since remarried, the other party may never receive their ‘earmarked’ share.
Couples going through a divorce often steer clear from pension earmarking as it means that both parties have to remain in some sort of contact until retirement, and can leave one party feeling dependent on the other.
Pension sharing
This is the most popular option for splitting a pension during a break up, but that doesn’t necessarily mean it is right for you.
It does, however, allow you to have a clean break from the other party without any further communication required – only optional.
Since the introduction of the Welfare Reform and Pensions Act (1999), a spouse is entitled to start negotiations for the main salary owner’s pension at 50/50.
Pension sharing requires the court to create a Pension Sharing Option which makes one party a Pension Credit Member, and the other a Pension Debit Member.
The final arrangement may not end at a 50/50 split between the parties, but this will be decided by the court, should an agreement not be made. The person, who is not the original pension holder, is either made a member of the pension scheme or chooses a fund for the credit to be transferred to.
Whatever decision you and your ex-partner come to, it is important to remember that this will have a significant impact on your retirement and pension options in the future, so think about your options wisely.
Pensionlite can help.
Our Free, Independent, No Obligation Pension Reviews are designed to put you in a position of knowledge before you make any decisions.
It will not cost you a single 1p to accept a review & recommendation report tailored to you, your circumstances and aspirations.
What have you got to lose?
Pensionlite carries the prestigious status of Chartered Financial Planners.
Our Chartered status, granted by the Privy Council, is our industries gold standard for financial planners and is currently held by less than 300 firms across the country.
This status brings with it serious obligations to ensure the advice, service and ongoing support we provide for you is of the highest quality, based solely on your researched needs and provided by someone of appropriate competency.
We offer whole of market choice and have no links or ties to any single business or organisation.
Our aim is to provide our clients with tailored solutions, created by advisers with particular skills and specialist qualifications.
Our advice process is always to gather a full understanding of our client’s needs, circumstances and aspirations together with detailed analysis of any existing arrangements and make written recommendations before any decisions or actions are taken.
We provide free, independent, no obligation review and recommendation reports covering all aspects of our specialist areas of work.
Knowledge is power and unless you know, how can you decide on a course of action.
We look forward to being of service.
To contact us telephone 01952 279 379, e mail enquiries@pensionlite.co.uk
or visit our web site www.pensionlite.co.uk and send us an enquiry that way you can get pension sharing advice you need.
Tags: pension sharing, personal pension advice
Posted in Pension Sharing
Monday, March 28th, 2011
We know that divorce is an incredibly difficult period for all parties involved, but pension sharing is a new idea on the market which has eased one financial aspect of the divorce. Reaching a fair financial settlement is usually one of the most stressful points of separating and previously the only pension options were ‘offsetting’ and ‘earmarking’.
 How did these previous options work?
Offsetting is where one party takes the pension, and this is then ‘offset’ with other assets. Earmarking is where the main breadwinner retires and begins to take the pension with a portion of it ‘earmarked’ to their ex-partner in regular installments. These options are still available but many now find pension sharing a more viable option.
Let’s compare pension sharing to the alternative options: earmarking or offsetting
Pension offsetting can cause many problems as achieving a fair of total assets is often difficult due to the fluctuating nature of pensions and property.
Pension earmarking is where the court instructs the pension scheme to pay a certain amount to the ex-partner, and this amount is usually set by the court at the time of divorce. However, the major downside to this is that payment is not made until the pension holder retires or passes away.
This means that one party is unable to receive a retirement income until then which might encourage an unwanted continued connection between the two parties. Understandably, this option is often not preferred by divorcing couples as one spouse usually does not wish to be dependent on the other to receive a share of the pension.
Another disadvantage is that the pension earning spouse dies before retiring from employment, the other party may never receive their share.
How does it work?
Since the Welfare and Reform Pensions Act (1999) came into effect, a spouse is entitled to claim 50% of their partner’s pension and cash lump sum as a start to the negotiations.
The court will create a Pension Sharing Order, making one partner a Pension Credit Member and the partner with the pension plan is the Pension Debit Member. The Pension Credit Member can then choose a fund where the credit can be transferred, thus allowing for financial independence.
What are the benefits to pension sharing?
Pension sharing allows a clean break between parties without any further communication necessary thus providing the couple with complete separation. This is now a popular choice if the divorce is less than amicable. Pension sharing is also seen as the fairest way to split a pension as the value of other assets does not come into play.
 Are there any negatives?
Not really, aside from the fact that this option is only available to married couples.
Financial arrangements for divorcing couples can be a nightmare – allow Pensionlite to help by providing you with a review of your pension.
Pensionlite are able to offer completely free no obligation pension reviews which will provide you with a full understanding of your personal finances before going through with pension sharing.
Pension&Investor Lite carries the prestigious status of Chartered Financial Planners.
Our Chartered status, granted by the Privy Council, is our industries gold standard for financial planners and is currently held by less than 300 firms across the country.
This status brings with it serious obligations to ensure the advice, service and ongoing support we provide for you is of the highest quality, based solely on your researched needs and provided by someone of appropriate competency.
Pension & Investor Lite, is an Independent Financial Adviser firm, Directly Authorised and Regulated by the Financial Services Authority, specialising in Pensions & Investment.
We offer whole of market choice and have no links or ties to any single business or organisation.
Our aim is to provide our clients with tailored solutions, created by advisers with particular skills and specialist qualifications.
Our advice process is always to gather a full understand our clients needs, circumstances and aspirations together with detailed analysis of any existing arrangements and make written recommendations before any decisions or actions are taken.
We provide free, independent, no obligation review and recommendation reports covering all aspects of our specialist areas of work.
Knowledge is power and unless you know, how can you decide on a course of action.
We look forward to being of service.
Get the benefits to pension sharing?
Tags: pension advice, pension sharing
Posted in Pension Sharing
Saturday, December 18th, 2010
Is pension sharing the best option for a separating couple? When a marriage breaks down and a couple divorce it is an extremely trying time. Emotions are high and yet there are unavoidable practical concerns which must be attended to, including of course the very important need to come to an agreement as to how the couple’s assets are to be fairly divided.
 During the court proceedings the judge will consider all assets, which include the pension rights of both parties. There are three possible ways for pension rights to be divided and an agreement must be made by the separating couple as to which one to choose. These are pension sharing, pension offsetting and pension earmarking.
It can be rather uncomfortable when making a final decision, as it is first necessary to establish the worth of each individual’s pension fund, which entails each party providing a full account of their financial details to the court.
Once this has been carried out the couple must decide on whether to opt for pension sharing, pension offsetting or pension earmarking when finalising the details of their divorce settlement before the judge.
Pension sharing is particularly popular, as it allows a complete separation and clean break without any further communication between the separating individuals being necessary, which can be useful if the divorce is less than amicable.
One party’s pension entitlement is taken from the fund of the ex-spouse who is the pension plan member. A Pension Sharing Order will be created by the court, making one party a Pension Credit Member, with the ex-spouse who is the pension plan member being designated as the Pension Debit Member.
The Pension Credit Member may then choose a pension fund into which the Pension Credit can be transferred.
Understandably, many divorcing couples prefer the clean break afforded by pension sharing, but what are the alternatives?
Pension offsetting entails the retaining of pension rights by the party who originally possessed them, while the other party has the value of the pension fund offset with other assets, which can be in the form of the marital home or other forms of shared property or valuables.
Issues arise, often leading to pension sharing being opted for at a later date, when the values of pensions fluctuate, which occurs with greater frequency than is the case with property values, meaning the original pension offsetting becomes unequal in value, causing one party to be disgruntled.
The other alternative to pension sharing is pension earmarking, in which the judge will order one party’s pension provider to pay a set figure from their pension fund to the other party. Upon the retirement or demise of the divorcee holding the pension the payment will be due to the other party at a rate initially set by the court, which can then be contested at a later date.
Obviously there are clear inherent difficulties with pension earmarking when compared to pension sharing, in that the separating couple are bound by a court order to remain in some form of contact and, indeed, a degree of dependency relating to the pension fund also remains. Many object to this and refuse to consider pension earmarking as a viable option.
Whatever choice is made, separating couples should adopt a stoic approach to settling their divorce and making a decision on their pension rights, as their retirement will be greatly affected by the choices they make.
Tags: pension, pension advice, pension credit, pension sharing, pensions
Posted in Pension Sharing
Tuesday, October 19th, 2010
Divorce causes a great deal of stress, particularly when you and your ex-spouse come together to divide up your assets. When this occurs a court will take all of your assets into consideration, including your pension rights.
The three choices available to divorcing couples regarding their pension rights include pension offsetting, pension earmarking and pension sharing.
Before making a decision, it is crucial to first know the approximate worth of you and your ex-spouse’s pensions, which will entail obtaining valuations of your pension pots from your pension providers.
 Consent must be given by either party for their pension value to be shared with their spouse. A full understanding of the implications of pension offsetting, pension earmarking and pension sharing must be possessed before making a final decision of which choice to make in your divorce settlement.
Pension offsetting consists of balancing the pension rights against another asset, most commonly the matrimonial home. Pension earmarking consists of a sum from one party’s pension being paid to the other party when the pension enters into payment.
Pension sharing consists of the pension being divided at the time of divorce to create two individual pension pots for the future, one for each party.
If you choose the option of pension offsetting, the party possessing the pension rights retains them for him/herself while these are offset by the other party being given the benefit of the other assets, such as being allowed to remain in the matrimonial property.
However there are issues to be aware of when considering pension offsetting, not least the difficulty in achieving a fair share of the total assets due to pension pots often being far greater in value and the frequency with which pension values fluctuate compared to property values.
If fair pension offsetting proves impossible, pension earmarking or pension sharing can be reverted to.
If you choose the option of pension earmarking, the court will instruct the pension scheme to pay an amount of the member’s pension to the ex-spouse. Although applications can be made to the court to vary the amount, the amount will initially be set by the court at the time of the divorce.
The payment will then be made when the spouse in possession of the pension pot retires or passes away.
However, it is important to consider the fact that pension earmarking is often seen as being flawed in that it does not allow a final clean break. The ex-spouse is unable to receive a retirement income until the other party retires or passes away, meeting a certain degree of continued connection many find uncomfortable when making their divorce settlement.
If you choose the option of pension sharing, the court will split pension rights between husband and wife on divorce, enabling a final clean break by separating the ex-spouse’s benefit entitlement from that of the pension scheme member’s fund.
The court will establish a Pension Sharing Order, creating the ex-spouse as a Pension Credit Member and the pension member as a Pension Debit Member. The Pension Credit can then be transferred into the ex-spouse’s choice of a suitable pension arrangement capable of accepting the transfer.
Whether divorcing couples choose pension offsetting, pension earmarking or pension sharing, it is very important they consider their particular circumstances, seek as much information and guidance as possible and keep in mind the fact that the choice they make will have a significant impact on their retirement life.
Tags: investment, payments, pensions, retirement, scheme, sharing
Posted in Pension Sharing
Saturday, August 28th, 2010
Pension sharing is a relatively new possibility for divorcing married couples. Many are finding it a considerably better option than those previously available.
Divorce is a very difficult time for all involved. One aspect that can be particularly problematic is the question of how to reach a fair financial settlement. In the past, when it came to pensions, the two main options were either the ‘offsetting’ method, whereby one partner takes the pension, and fairness is aimed for by ‘offsetting’ this with the way other assets are distributed, or the ‘earmarking’ method, whereby when the main salary-earner retires and begins to draw his/her pension, a portion is ‘earmarked’ and transfers to their ex-spouse in regular payments.
These two options are still available, and can appeal in some cases. However, many divorcing couples are now finding pension sharing a preferable option, due to its allowance of a ‘clean break’, and greater independence, fairness and closure for both parties—usually more so than in either the ‘offsetting’ or ‘earmarking’ solutions.
 In the case of offsetting, for instance, it may be hard to determine what particular portioning of other assets amounts to a fair correlate of the pension.
On the other hand, with earmarking, one spouse is dependent on the other to retire in order to receive their share of the pension; and this may not happen when they expect or would like it to.
If the pension-earning spouse dies before retiring from work, the other spouse may even never receive their earmarked share.
However, since the new Welfare Reform and Pensions Act (1999) came into effect in December 2000, a spouse (be that husband or wife) is entitled to claim 50% of the main salary-earner’s pension and tax-free lump sum, at least as a starting point in negotiations.
The final pension sharing arrangement does not have to be 50/50, but the court generally works from that as a starting point.
If this, or another division, cannot be agreed upon by parties, then it is up to the court to make a decision based on its assessment of the overall factors involved.
Once the pension sharing settlement is reached by the court, the spouse who isn’t the main salary earner can move a discrete portion of the pension to a different fund, allowing independence and a clean break, with each party having much greater control over their own personal finances.
In this solution there is no ambiguity over the worth of assets, and no situation where one spouse is tied to the other through regular earmarked payments which they have no control over when they start receiving.
If you are considering taking the pension sharing route then you may well need both a valuation/review of your pension, and some expert advice. We can provide both in our free, no obligation, independent pension review.
Some things to note about pension sharing:
- A new and popular alternative to older pension divorce settlements.
- Allows a ‘clean break’.
- Can be 50/50, but does not have to be.
- Only available to married couples divorcing (i.e. as opposed to co-habiting couples divorcing, or married couples undergoing judicial separation, etc).
- Either occupational pensions or private pensions can be made subject to pension sharing arrangements.
Remember, you can request a pension review and advice into issues such as pension sharing from us, free of charge and no obligation.
Tags: advice, pension reviews, pension sharing, pensionlite, pensions, sharing
Posted in Pension Sharing
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Pension & Investor Lite, Pensionlite, Investorlite and ISAlite are the trading styles of Advicelite Ltd, which is Authorised and Regulated by The Financial Services Authority.
Registered office Summit House, Wanstead, London E11 2AA. Registration number 05217472
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