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Pensions now as important as property in divorce settlements

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
12/05/2015

Pensions have now become pivotal assets in divorce settlements, on a par with property, according to research issued by Equiniti.

The findings from the UK’s largest pension administrator suggest that the significance of pensions in divorce settlements is likely to increase in future, as more people begin to understand the significant sums of money involved.

Equiniti has seen a significant increase in pension valuations as a result of divorce over the past couple of years. It expects the number of valuations to increase even further due to the greater awareness of the value of pensions following the new pension freedoms as well as new rules allowing retirees to sell their annuity contracts for cash coming into force next year.

The recent Supreme Court ruling in Wyatt vs Vince, which allowed the ex-wife of a former traveller turned multimillionaire renewable energy tycoon to seek a divorce settlement based on his contemporaneous financial standing, could also see thousands of ex-wives and husbands pursuing their former spouse for money (and pensions) years after they divorce.

“Although the pension reforms back in the 1990s were expected to increase the importance of a pension as an asset at divorce, this did not initially materialise,” says Paul Sturgess, director of strategy and pensions administration at Equiniti.

“However, in recent years awareness of the significant financial value of pensions has risen, and as a result they are increasingly being assessed as an asset at divorce. This spike is likely to be further fuelled by the current focus on pensions, which has highlighted the value of both defined contribution and final salary schemes.

“The Supreme Court ruling is likely to also have a further knock on effect, prompting many divorcees to revisit the fact that no Financial Order was put in place at the time of divorce.  Nevertheless, not everyone fully understands the asset value of their pension and it could be a rude surprise for a divorcee if an ex-spouse was the source of this financial education years later.”


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