BACK<\/strong> in 2018 it became legal for couples to prepare and submit their own divorce paperwork. Great idea, you might think, if you\u2019re one of the tens of thousands1<\/sup> of people in the country getting divorced this year. That\u2019ll save some money, especially if your divorce is straightforward. But does a \u201cDIY\u201d divorce come at a longer-term cost?<\/p>\n Pension sharing orders are down<\/strong><\/p>\n Ministry of Justice figures recently show that the number of pension order sharing applications has fallen by a dramatic 35% since the so-called DIY divorce was introduced (despite a 1.6% increase in divorces between 2017 and 2020)2<\/sup>.<\/p>\n As women typically reach retirement with far less saved than men – thanks to gender pay differences and women taking career breaks – lawyers are concerned that women are likely to come off financially worse in a DIY divorce.<\/p>\n What is a pension sharing order?<\/strong><\/p>\n A pension sharing order is a court order that\u2019s used to separate two people\u2019s pension assets. They can be issued for both a divorce and the dissolution of a civil partnership. There\u2019s no legal requirement for a couple to surrender part of their pension in a divorce settlement, so a percentage must be agreed between the couple – or the courts will.<\/p>\n Why are pension sharing orders important in divorce?<\/strong><\/p>\n Aside from any property you might possess, your pension is likely to be one of your largest assets. Whether you\u2019re using a lawyer or filing for divorce yourself, you should make certain that your pension pots are part of any divorce settlement.<\/p>\n How does a pension sharing order work?<\/strong><\/p>\n If you and your soon-to-be ex can agree on how your pensions should be split, you\u2019ll only need a consent order from the court to split your pensions. If you can\u2019t agree on how your pensions should be divided, then the courts will decide.<\/p>\n The courts will value both you and your partner\u2019s pension assets. The valuation will include your workplace pension arrangements – both present and lapsed (the onus is on you to locate each one – even those from long ago). It will also include any personal pensions, such as a self-invested personal pension<\/a>. Even some annuities<\/a> can be subject to a pension sharing order – but certainly not all, so do your homework. The basic state pension is exempt from pension sharing. But anyone over a certain age who receives an additional state pension<\/a> should take note – as this is not exempt from pension sharing.<\/p>\n Once the courts have all the information they need, they\u2019ll review the conditions under the order and split the pension in a manner they deem fair.<\/p>\n Act in haste, repent at leisure<\/strong><\/p>\n If you\u2019re sure divorce is what you want, do your research before deciding whether you need a lawyer or you\u2019re happy to DIY it. You only get one chance to get this right and there\u2019s a lot to think about.<\/p>\n Besides your pension and your house (arguably your largest assets), don\u2019t forget about any investments you hold – which may also be part of your divorce settlement. It\u2019s possible to transfer assets between husband and wife without there being a capital gains tax liability, but this should be done in the appropriate tax year. Leave it too late and you\u2019ll face a tax charge. You should also update your will.<\/p>\n Once your divorce settlement is in, it can be intimidating to know what to do with a large sum of money. You may like to talk to a financial adviser<\/a> if you\u2019re looking for a personal financial recommendation.<\/p>\n 1<\/sup>\u00a0In 2020, 103,592 divorces were granted according to the Census 2021<\/a>
2<\/sup>\u00a0Financial Times – July 5 2022<\/a><\/p>\n<\/p><\/div>\n
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