When getting divorced, it can be a significant mistake to overlook the value of pension assets.
Andrew Tully, technical director at insurer Canada Life, has referred to neglecting pensions on divorce as a “huge mistake”.
Tully explained that, while divorce can be an exceptionally stressful time, getting pensions valued during the proceedings is essential, despite the perception of complexity.
A new Freedom of Information request submitted by Canada Life found that there has been a 278% increase in online divorce petitions since May 2018. The FOI response revealed that 207,000 online divorce petitions were lodged with the courts in the past four years.
The Ministry of Justice shared data showing that monthly online divorce applications rose to around 8,000 a month, up from approximately 2,000 a month at the start of the reporting period.
Despite this significant increase in online applications for divorce, another report shows relatively few pension sharing orders in place.
The research from Now Pensions found that fewer than two in 10 divorces include a pension sharing order.
A pension sharing order is a court order allowing pension pots to be split between divorcing partners.
Without a pension sharing order, pension providers cannot split a pension pot to share it between a couple or civil partners getting divorced.
Commenting on the findings, Andrew Tully said:
“Adding pensions into the mix can be daunting, but not dealing with pensions can be a huge mistake.
“People often avoid or overlook pensions because they can seem complicated. Where there is a solicitor involved, they should know to get the pension valued.
“But where there isn’t, many people, especially women, opt to try to keep the family home without understanding the real value of the share of the pension they have given up.”
Canada Life has shared the following pension tips for couples getting divorced:
-Couples often write wills to help with division of assets, but when you get married any existing wills are invalidated. When you get divorced any existing wills are respected unless they are updated
-Pensions are a complicated area when looking at divorce and sharing orders, attachment orders or clean breaks are all available by way of sharing assets
-Pensions in payment using annuities – on divorce, unless the death benefits for annuities are updated with new spouse details, the original beneficiary will receive any annuity benefits from guarantees
-Control of assets on divorce – the use of trusts, including spousal bypass trusts, mean you can retain an element of control over assets
-Investment Bonds can be assigned by Court order to ensure there is no tax due when assets are transferred.