Pension warning: DIY divorces could see pensions targeted 'years after settlement'

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    The financial adviser said the recent boom in equities has made pensions a highly desirable asset in divorces.

    Tim Holmes, Managing Director at Salisbury House Wealth, said: “2020 was another banner year for many pension funds.

    “With the value of pensions increasing, they have become an increasingly important asset in divorce settlements, second only to the family home.

    “If you do receive a spouse’s pension as part of a divorce settlement, it would be wise to make some contributions to your own personal pension rather than using for using it for day-to-day expenditure.”

    As the value of pensions has surged in recent years it has become much more difficult to use spare cash to buy an ex-spouse out of their share of a pension.

    This is a major reason for 2020s high number of split pensions in divorces.

    READ MORE: When will I get my State Pension? How to use handy State Pension

    This is because agreements made today may be reopened tomorrow if paperwork is filed incorrectly or is incomplete.

    Naturally, this is more likely than when professional lawyers are involved in proceedings.

    The caution expressed is warranted because these DIY divorces accounted for 58 percent of all divorce settlements in 2020/21 according to the Ministry of Justice.

    A striking example of the problems that may arise after DIY divorces came in 2016 when a successful green energy entrepreneur was ordered by the Supreme Court to pay his ex-wife £300,000 years after their split.

    This was the case because both parties had earlier neglected to waive the right to make more claims against each other.

    While not so bad for the party receiving £300,000, many may be startled to realise that they may be vulnerable to such claims themselves if they went through a DIY divorce.

    Mr Holmes says: “DIY divorces create a risk that the financial settlement could be challenged in court, years after the divorce was finalised, leading to the spouses’ pension being targeted.

    “This could mean that a sharing order is triggered forcing the wealthier party to pay out money on a pension pot that has increased in value.

    “Anyone who is going through a divorce should consult a solicitor – the legal fees will be considerably less than paying half of your pension to your former spouse.”

    As pensions look set to increase in value further in coming years, Salisbury House Wealth say it is increasingly important to seek independent advice on how to manage funds.



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