How does a pension sharing order work?
Finalising your financial assets during a divorce settlement can be beyond stressful. It is both practically and emotionally draining, and something you just want to be dealt with. This is where a pension sharing order can make your life that little bit easier. Having this order in place takes the pressure off how you’re going to split your assets for future financial security.
A pension sharing order works in a sense that it divides your pensions up fairly and ensures both parties are left with sufficient funds going forward.
There are numerous reasons why you may need to split your pension or be entitled to a fraction of your spouses, as legally you are more than entitled to do so. Say for example you’ve given up your dream job to look after the kids or to keep the house in order, you then don’t have your own pension for the future and may be sceptical. Especially when you’ve put your life on hold to support your other half working, you want to feel secure in knowing you can carry on without the stress of money troubles. It’s probably inevitable that you’ll get another job and start your own pension fund, but if you’re divorcing later in life this may not give you the sufficient funds you need.
You may have even had a job prior to giving it up, with a small pension, and that’s perfectly fine as you will just be able to add to it with a pension sharing order. On the other foot of things, you may be the party giving up part of your pension and want to know it is done so correctly and fairly. Besides the marriage or civil partnership coming to an end, prior to this your other half may have raised your children and put their life on hold for you. They may even still be raising your children now. By taking out a pension sharing order, you can have peace of mind that all of that will be
taken care of.
If you’re worried about losing half your pension then have no fear because pension sharing orders aren’t just split 50/50. Both your solicitor and financial advisor will be able to calculate a fair amount. If you and the other party can’t come to a reasoned amount, then this will be taken into the court’s consideration. A court order is necessary for a pension order to go through anyway, as it is a legality, but this just means to court will decided upon on amount that you weren’t able to.
Once the court has produced a final figure, the trustees involved will notify both parties within 21 days of the outcome. You can also choose how you wish for it to be implemented if you haven’t done so already. This could be a lump sum pay out or if you wish for both parties to receive the pension at the age of retirement when it is due to kick in. It can be more tailored and personalised than you think, but it is always best to seek financial advise prior to applying for a pension sharing order. Speaking to a financial advisor can give you the best options available and suitable for your needs.
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