My 4 Step Thought Process For Your Divorce
Feb 15, 2016
This is the basic process I use when looking at pensions in divorce cases and I thought I would share it with you. It breaks down as follows:
- Context – What is the bigger picture?
- Assess – How is the pension being valued?
- Purpose – What are we doing with the value?
- Identify – What types of pension are we looking at?
When I am asked to get involved in a financial settlement whether it is by a solicitor or directly instructed via the internet the first task I undertake is one of identification. What type of pensions are involved. The type of pension involved is a critical piece of information because it will give clues to many different things:
- The type of benefits/scheme – be it money purchase or defined benefit.
- Whether there is a danger of an apples and pears approach to splitting the pension (i.e. not dealing properly with like for like comparisons).
- What risks are there in the pensions and if they are shared via a pension sharing order.
- What pension sharing options might there be?
- What expert would be right for the work? Actuary or pension expert?
For what purpose are we using the pension value? For example, is it for pension sharing or offsetting and might the value we use need to be different in different settings?
It is important to assess how the pension is being valued and whether the benefits are likely to be undervalued? What could be undervalued? Is it part of the benefit structure of the pension scheme which is simply not valued as part of the Cash Equivalent Transfer Value or could there be some hidden value in the policy terms of the personal pension?
Whatever it is I am looking for it because I know that if we don’t get the valuation basis right and on a fair even and consistent basis than the outcome is likely to be skewed.
As a financial planner I am always looking at the bigger picture and making sure any decision making is set in context. What is happening elsewhere in the financial settlement? Would pension sharing cause a major loss of benefit / transfer value that could be offset elsewhere. What is in the best interests of the individuals involved? What are the outcomes of any action taken?
By using this approach it enables me to take an objective view and help my client to take informed decisions and to understand the bigger picture better.
Meet The Author
The Divorce IFA is Phil O'Connor, a Resolution Accredited Independent Financial Adviser helping clients make better, more informed financial decisions on divorce.