If you are subject to a divorce.
Naturally the first professional adviser you may turn to in a divorce is a lawyer.
However, there are aspects to divorce proceedings which may require other advisers, especially one who can provide specialist financial advice
Most lawyers will be restricted from giving such advice.
A typical scenario where this is highlighted is where one of the parties has a pension.
Pensions can be simple or can be complex, depending on a range of factors. They can also represent a considerable value and that value may represent a large proportion of the assets that need to be considered in divorce proceedings.
If the situation is a combination of a complex pension arrangement and a decent value applied to this, then flashing lights should be going off as this almost certainly means expert advice is required, from an independent financial expert.
There are various ways a pension may be treated in a divorce, which now includes what is called pension sharing. This is one of the options.
The temptation may be to accept that this is the best option without proper evaluation.
Pensions are not always easy to value, for example any pension which is based on a ‘final salary’ calculation will not have a value as such.
A final salary pension typically provides a pension at retirement based on a formula of salary, averaged over the past few years of employment, and the number of years of service in that employment.
In this sense, the pension is a promise of a future income payment. Therefore, for divorcing couples trying to fathom what the pension is worth now can be tricky and the normal way is to obtain a transfer value from the pension scheme.
Transfer values are not set by any defined method, so it is entirely possible that two experts both ‘valuing’ such a pension could come up with different figures.
Checking a pension value offered in these situations makes sense, as it could have significant implications for the divorce settlement.
That is an example of just one possible complication. There are many – to do with how pensions are taxed, the options once a divorce has concluded and the pension has been sorted, how pensions are dealt with on death and, in some cases, how much pension entitlement any one individual can have as a maximum before they are subject to the lifetime limit.
The key point is that only a regulated financial adviser can provide advice on these points, a divorce lawyer is unlikely to be regulated to give such advice, there may be exceptions but these are likely to be few and far between.
Financial advice may also be desirable to consider what happens to mortgages in a divorce, other borrowings or loans, life assurances, ISAs and other savings accounts and also, in the case of a settlement, how to invest this post-divorce.
Whilst the temptation is to link ‘divorce’ in one’s mind directly to a lawyer, in so many ways the financial adviser can be just as crucial to finding the most suitable financial outcomes.
Our advisers have lots of experience of helping both the spouse with the pension and also the spouse who hasn’t got a pension and then helping them map out their financial future after the divorce is finalised.