With endings come new beginnings
Divorce and Financial Planning
According to the Office of National Statistics, there were 80,057 divorces granted in England and Wales in 2022. If you are thinking about divorce or going through the divorce process, you will need support from a number of different people.
Emotional support can be provided from family and friends, some of whom may have gone through the process in the past. In addition, you might want to consider seeking out a psychologist or divorce coach.
You will also need to understand legal and financial areas that you are unlikely to have come across before. A great resource to help start this, is the Divorce Survival Guide by Advice Now.
It will be a time of uncertainty so if you need help, spend time to choose the professionals you want to work with. Whilst there are costs to engaging a professional (such as a solicitor, financial planner or actuary) an initial chat, typically at no cost, can help you understand where you might need to engage experts and when they can help in the process. To move forward in a constructive manner, you may wish to consider someone who has agreed to abide by the Resolution code of practice which reinforces a constructive approach and putting family and children first.
4th June 2024
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Tim Blowers See profile
When considering the financial side, you might initially consider some of the following:
- Statements – cash accounts, investments, pensions
- Budgeting – what do you have coming in, and how might this change in conjunction with your spending.
This can be more complicated if there are trusts (with or without an entitlement to income) or family assets such as farms involved where valuations can be very important along with the dynamics and history of the family.
One area often overlooked is Pensions, it can be key as it often represents one of the larger assets and is frequently ignored and not understood. According to the University of Bristol’s Fair Shares? Report, 23% of divorcees went through the process not knowing what type of employer pension they had at the time of the divorce.
In particular, there are certain times when it can be very important to seek advice which includes some of the following:
- Public sector scheme pensions (such as Armed Forces, NHS) or complexities in other defined benefit pensions
- Significant differences in age and the amount of income
- Medical issues
- Older pension plans for example, if they mention guaranteed annuity rates (GARs) usually working pre-1988 (so unlikely to affect anyone younger than 54), or guaranteed minimum pension (GMP) if you worked between 6 April 1978 to 5 April 1997 (so in this instance anyone younger than 45 would be unaffected)
- International considerations, either for the individuals or assets.
There are a number of different options for splitting pensions but when looking to achieve a clean break, pensions are now typically shared. There is a short video which helps explain, in a Guide to Pension Sharing.
The main areas that a financial planner can help include:
- Helping you understand what you own, what you earn and spend. Helping to understand what you might need as part of an agreement
- Projecting forward to help explore what your financial future can look like and how secure it might be, with steps you could take
- Explain areas you might have discussed with a solicitor, along with helping you to understand an actuary report
- After agreement has been reached, assist you with getting plans in place (such as a pension share) and support you on an ongoing basis to provide financial peace of mind.
Tim Blowers specialises in Financial Planning on Divorce, is a Chartered Financial Planner and Associate of Resolution. Please get in touch to discuss, this can start with a free initial 30-minute call to understand how we might help.