Most of us do not like thinking about planning for our retirement. We often say tomorrow but for many of us tomorrow never comes.
However if you are getting divorced you have to face the prospect of the end of your marriage and sorting out financial claims, including pensions. The temptation, when there is so much stress and a need to move on with your life, is to accept a financial settlement without paying enough attention to pensions. After all, there is always tomorrow.
Research from Royal London says that women who divorce end up with less than half the property and assets of married couples and, more importantly, less than one third of the average pension pot.
Royal London are rightly encouraging those who are divorcing to recognise the value of pensions and to take pension advice to make sure , in Royal London’s words , that divorced women do not continue to be ‘pensions poor relations’.
The Royal London research analysed the data from the government’s Wealth and Assets Survey (WAS), and looked at the pensions and property of divorced women compared to with married couples.
The main points that came out of the Royal London research were:
For women who are aged over fifty the average married couple has three times the pension wealth of the average divorced woman; and
Women who are aged over fifty and divorced do not have more equity in their family home to compensate them for lack of pension wealth.
Some may shrug off this Royal London research, thinking that it is very specialist. However, one in three women aged 55 to 70 will experience marital breakdown or divorce. Therefore, whilst Royal London has looked at complex data it is a common problem, the effects of which are only appreciated long after a divorce and when a woman comes to draw her pension income.
Divorce and pension rights
As a specialist Manchester family law solicitor advising on divorce and pensions claims my experience shows there are a number of reasons why pensions are not properly considered on divorce. The main reason that pensions are not divided fairly is that people do not understand them and think that they will have many years to worry about building up a pension.
There is often a reluctance, on the part of both husband and wife's to get a pension report from an actuary or pension expert. That is partially because people worry about the cost of a report and partially because they do not see the relevance of a report. Frustratingly, from a Manchester divorce solicitor and pension expert’s point of view, the importance of the pension report often only becomes apparent after you have received the report.
Nowadays I tend to ask if someone would buy a house without a survey. The answer is invariably no, and a puzzled glance questioning why I would even contemplate buying a house without a surveyor’s report. However, pensions can be just as valuable as a family home and so they need to be treated with the same respect.
The other reason people do not look at pensions seriously on divorce is that retirement, even if it is five or ten years away, seems a very long way off indeed. A pension expert will tell you that it is not and even ten years of making pension payments into a pension scheme may not recoup what you have missed by agreeing to an unfair division of the pension assets on divorce.
When you are getting divorced, it is hard to get to grips with all that is happening in your personal and financial life. That is why you need an expert divorce solicitor. They in turn need to be helped by a pension actuary or expert to look at the true value of the pension pot and to consider your pension and financial settlement options.
When you get divorced and sort out financial disclosure, you will be presented with what is called the cash equivalent transfer value of your pension and that of your spouse. The paperwork and figures may look impressive but they can be highly misleading.
If you have a private pension with a transfer value of £100,000, you would think that your pension pot is as valuable as your spouse’s final salary pension pot with a transfer value of £100,000. You would therefore assume that a fair financial settlement would involve you both keeping your pensions, with no need for a pension sharing order.
You could not be more wrong as a pension actuary may tell you that the occupational pension will pay out three times the pension income of the private pension scheme. That means if no pension sharing order is made one spouse is on triple the pension income of the other spouse.
It is important that even if you are a bit hazy about pensions that you chose a divorce solicitor who knows about pension rights and the importance of getting expert help from a pension or financial advisor or actuary.
As a Manchester divorce solicitor, I know how vital it is to protect someone going through a divorce. Divorce and pension rights are not likely to be a priority topic but I know my job is to look at both short term and long term interests, and that normally includes the option of a pension sharing order.
By Robin Charrot
For information and advice about pensions and financial claims on divorce please call me on +44 (0) 1477 464020 or contact me by email at firstname.lastname@example.org
Appointments available in Prestwich, Manchester and Holmes Chapel, Cheshire
"Common law marriage and cohabitation"
The government has recently produced the above document which provides general information on the number of cohabiting couples, how the current law applies to them, and the proposals for reform that have been put forward by the law commission.
Common law marriage refers to when a couple live together in a stable relationship, with or without children. It is often an option to describe your marital status on commercial documents such as insurance forms. However, it has no legal basis in England and Wales. Unlike within the forms of union of either marriage or a civil partnership, cohabitation provides no legal protection for the couple in terms of financial, or inheritance issues if the couple separate or one dies. This is why it is an area of concern for the government.
To add further cause for concern, the government has reported that the number of cohabitants (opposite sex only) between 1996 and 2015 doubled from 1.5million to 3.1million, and the number of children in these relationships increased. The number of same sex cohabiting couples increased from 16000 to 90000, despite the introduction of civil partnerships and marriages for such couples. At the same time the number of married couples has remained roughly the same, and the number of children to married couples have fallen.
The main problems for cohabitants are as follows:
They have no guaranteed rights to each other's property. On separation, the courts have to apply the strict letter of the law regarding ownership. It is sometimes possible when the property is owned just by one person for the other to establish that they have a 'beneficial interest', but the law is far from certain and each case is decided on its own specific facts.
Where a cohabitant dies without a will (intestate) the surviving cohabitant has no automatic right to any of the deceased's estate. They could make a claim, but this requires a court case.
With regard to social security, cohabitants do not benefit from contributory based benefits which look at national insurance contributions. For example, they cannot rely on their partner's state pension contributions
As a family lawyer, it is of primary concern to me that cohabitants face significant difficulties sorting out their financial situations upon relationship break-down. Whilst there have been a number of recent cases which demonstrate that a cohabitant who does not legally own a family home can establish that they have some interest in that property, to do so often requires the instruction of a solicitor to set out the legal grounds for a claim in the family home and a dispute with the ex-partner. This is something many are keen to avoid and consequently the non-legal owner may decide to settle the case at an early stage or not pursue it all. Therefore, financial hardship upon the breakdown of a relationship is a realistic possibility in many cases.
The Law Commission proposed in July 2007 that a scheme of financial remedies on separation for cohabitants should be introduced. Their proposal was that the financial remedies should be available based on what each individual contributed (rather than what they needed which is the primary case for married couples on divorce). They did not propose that the property should be divided equally nor that there should be the ability to obtain maintenance from the ex-partner (save for child maintenance). Unfortunately, no government has decided to implement the reforms since they were proposed, and for separated cohabitants their situation remains very uncertain.
In the absence of any imminent reforms to the law, the current best option for cohabitants who are concerned about property issues is to enter into a Cohabitation Agreement or Living Together Agreement which is a form of contract setting out a couple’s decisions about what will happen to their property on separation. It works in a similar way to a prenuptial agreement and if drafted properly by a specialist family lawyer would be upheld by a court.
If you are interested in a Cohabitation Agreement, or have any concerns about financial matters following a recent separation, please do not hesitate to contact me.
Habitual Residence means the country where a child lives permanently. It seems straightforward but this is a far more complicated question than would appear, particularly when a child has just been moved to another country. It was previously thought that a child would not be 'habitually resident' in the country they have moved away from as soon as they leave that country. However it was also the case that you could not be habitually resident in a country the day you set foot there. This has meant that the courts would decide some children have no Habitual Residence - a limbo land where making decisions about their welfare was difficult or impossible.
This week however, the Supreme Court handed down a judgment in a case (https://www.familylaw.co.uk/news_and_comment/re-b-a-child-habitual-residence-inherent-jurisdiction-2016-uksc-4#.VrRGXI6COrU) involving a lesbian couple and their 7 year old daughter, which should make such difficulties a rarity.
The case centred around a 7 year old girl (referred to as B) who had been moved to Pakistan with her mother in February 2014. She had been born as a result of IVF treatment with a sperm donor in 2008. Whilst the non-biological mother could not legally be her parent there was no doubt over her role as a parent in the family, and it was clear that she was treated as a mother by the child. The parents separated in 2012, and over the following 2 years the biological mother gradually reduced the amount of time the other parent spent with her. This culminated in the non-biological mother instructing a family lawyer in 2013.
In secret, the biological mother moved with the child to Pakistan in February 2014. It was in March 2014 that the non-biological mother made an application to the court. She was unaware until June of that year that B had been taken to Pakistan. Initially the courts ordered that they could not make any decisions about B 's contact with her non-biological mother because when she was taken out of the country to Pakistan in February 2014 she was immediately no longer habitually resident here. In this landmark decision, the Supreme Court decided that this could not be the case. They confirmed that Habitual Residence does not immediately disappear as soon as the original country has been left, and the following issues must also be considered:-
A) if the child was very integrated in the original country, the longer it would take for them to be integrated into a new one
B) it is likely that if the adult has done a lot of planning for the move, particularly in relation to the arrangements for the child's day-to-day life in the new country, the child's integration into the new country is going to be faster
C) integration into the new country will occur faster if central members of the child's old life have moved with them, and conversely the integration will take longer if key figures to the child have been left behind.
Looking at B's situation from this perspective meant that the English court could easily decide that when the non-biological mother made her application to the court (9 days after B had moved to Pakistan), B was in effect still habitually resident here. As a result the courts of England and Wales could make decisions with regard to when and how often and by what means she could see her other parent.
This signals a child-focussed approach, a more modern focus on the child rather than the intention of the parent. It is hoped that this will also mean that no longer will a child fall into the limbo-land of having no country of Habitual Residence that can make decisions about their welfare.
I am an experienced family lawyer specialising in children disputes, particularly those with a international element. Please do not hesitate to contact me for advice in this area (01625 728010)