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Confused about premarital pensions

  • riseandshine
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17 May 12 #331078 by riseandshine
Topic started by riseandshine
I''ve now spoken to a solicitor about my impending separation/divorce, but he''s left me more confused than ever about pensions, and unfortunately I didn''t realise how confused I was until after I''d left the appointment!

This is what I thought would happen:
CETVs apportioned by (cohabiting + married years) / (total accrued years)
then we look at the difference between his and mine, and work out if it''s worth haggling over, sharing, or whatever.

But - the solicitor said that it could be argued that all the CETVs are in the combined marital "pot", and I should be going for a pension share, especially given that I will be primary carer for children for the next 16 years, limiting my future pension accrual prospects.

I said I thought that only the maritally-accrued portion went into the shared pot, and he hummed and said "welllll, some judges might take that view, but others would be looking to equalise retirement income" [or words to that effect]. I am 17 years younger than H.

The solicitor also said that my husband''s retirement lump sum could/would be considered as a cash asset for potential division, even though he''s not received it yet, because he could receive it any time he wanted to (he''s already passed the scheme''s minimum retirement age).

I''ve looked elsewhere on this site, and it seems to say that in Scotland, premarital contributions are separate, but I can''t find any info about whether this is the case in England and Wales.

Please unconfuse me!
This solicitor was a Resolution member, by the way.

Thanks
H

  • maisymoos
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17 May 12 #331079 by maisymoos
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Hi Your solicitor is right sometimes pre marital contributions may be discounted and others times not. It would depend on the individual case.

In my case all premarital contributions were included and I recieved 50% of the pension pot. This was in part due to my reduced ability to accrue pension due to having young children. The judge also pointed out that as my ex was a higher earner so he had a better opportunity to add to his pension in future years.

  • hadenoughnow
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17 May 12 #331112 by hadenoughnow
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riseandshine

It is all about needs and what is in the pot to meet them. There is no hard and fast rule that premarital pension contributions are left out of the pot.

How old are you both?

If he is of pensionable age - and could retire at any time, it is perfectly possible that his pension lump sum would be counted as part of the cash pot - and the residual pension be counted as income. The cash lump sum would be added to house equity etc and then you could work out how you could both be housed etc.

It is also possible to take the lump sum and share the residual pension .. although you would not get yours until retirement. It does sound though as if your need is for more equity now to allow you to house yourself and the children .. and you could downsize later to provide a pension for yourself. Bear in mind that by divorcing, you are losing your right to a widow''s pension should he predecease you. The children should still be entitled to a dependent''s pension in this case.

Without the figures it is very hard to advise more effectively.

We need to know: ages, incomes, length of marriage inc any cohab, children - ages and arrangements, value of FMH, outstanding mortgage, size of FMH, pension - CETV (and in this case also projected lump sum and annual income), savings, liabilities - ie debts in sole or joint names.

It would also be helpful to know the price of a suitable alternative property sufficient for your needs - children of same genders to share rooms if necessary.

Hadenoughnow

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18 May 12 #331341 by riseandshine
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Thanks Maisy, mine is a vaguely similar situation to yours, so it seems to fit in with what my solicitor said.

The difference is that my STBX is nearing retirement age and will have little/no time to repair his pension record. He could retire any time now, or could go on for another few years if he wanted to (and OW is work colleague, so I guess he will want to continue!)

Hadenough - I''ll repost our financials from an old thread. The additional info that was not there is, assuming STBX retired now:

Standard pension: £25K pa
Standard lump sum: £75K
(Opportunity to exchange some pension for more lump sum, and vice versa)
Plus state pension from age 65

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18 May 12 #331343 by riseandshine
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Me: 40, work 28 hours pw, net income £1250 pcm + child benefit £144 pcm + maintenance max £550
Him: 57, works full time, net income £2750 pcm

Two kids: aged 2 and 7, will live mainly with me, and stay with dad 1-2 nights out of every 7 maybe
Marriage: 10 years
Cohabitation: 2 years
He has worked full time for all those years; I have done mixture of full-time, part-time, maternity leave, studying.

Housing plans:
Me and kids: to stay in FMH (currently not controversial)
Him: to cohabit with affair partner in her house initially; wants to buy somewhere bigger with her.
Neither of us have great mortgage potential – I am currently on a fixed term contract; he is due to retire soon.

Outgoings: (essentials, not including holidays and things)
Me and kids: £1800 pcm
Him: £850 pcm + £550 max child maintenance – total £1400

Assets:
FMH: worth £240000, no mortgage
Savings: £215000 between us, some in each of our names
Other possessions insignificant compared to above, and we should be able to agree fair division.

Pensions:
His: Final salary, estimated CETV £320K, will get big lump sum in ~5 yrs time + decent pension, 24 yrs accrued before we cohabited; 36 years accrued in total. I will lose rights to significant spouse’s pension on divorce.
Mine: Mixture, total estimated CETV £50K, all accrued during marriage.

Debts: none

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18 May 12 #331344 by riseandshine
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When I posted this before (a while back... things are moving slowly), I received some really helpful advice from wikis - basically for me and the kids to get the FMH, him get the savings, and keep our own pensions.

The reason I''m reposting is that my solicitor said I would be short-changing myself and the kids if that''s all I asked for, and I need to consider my (and the kids'') future security as I''ll be working part time for the next decade or so, and cannot guarantee my future health/employment, etc, so would be justified in asking for some more as a contingency.

He seemed fairly adamant I should be aiming for the FMH, some of the savings for an emergency fund, and a pension share.

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18 May 12 #331391 by hadenoughnow
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rise and shine,

The first thing to remember here is that you instruct your solicitor and not the other way round. Pensions can be a very tricky area - especially when they have been accrued for so long before the marriage. Going for a pension share could well be a flashpoint .. and you could end up spending a great deal of the assets pot on battling through the courts when there are other ways to approach the situation.

He had a life before he met you .. and some of his assets come from that time but the important thing is that there are also two young children to consider.

You are in the fortunate position of being able to afford a mortgage free property apiece from the available cash pot (FMH plus savings).

This will take care of the housing needs so contributions will also come into play.

Your income is less than his - btw you do not mention tax credits; are you claiming these as a single parent?). However as and when he retires, his income will decrease significantly. Assuming he keeps his entire pension, CM will reduce by some £200 a month.

You could view the situation like this:

The cash pot could be considered to be: FMH, savings + pension lump sum (which he can take BEFORE he takes pension income any time now).
So 240k + 215k + 75k = 530k.

It is not strictly how it is done - there are no hard and fast rules - but it would be reasonable, given that you have been married for 1/3 of the time he has accrued pension (and have only accrued 50k in your own right) for his 25% tax free lump sum to go into the pot and for him to keep the rest.

If you each have a 240k property, that leaves 50k over. It could reasonably be argued that he should have most or all of this given that needs are met and he has contributed for longer. You do not say how much of the savings pot is in your sole name .. would it be fair for you each to keep your own savings?

Another way to look at it may be that he is cohabiting and will have 2 incomes to live on/fund property etc .. so perhaps you should have a larger share of the cash assets but no pension share. 60:40 would give you some 320k and him 210k (inc pension lump sum). You could use the additional cash to top up your pension fund if you so choose.

You have a small pension pot - but would have a mortgage free £240k house which you could use in part as pension - downsizing to free up cash when the children are adults.

I don''t think SM at a substantial level is an option here - although given the ages of the children, you may want to suggest a global maintenance order (SM + CM) at least until the youngest goes to secondary school say at the current max CSA rate or just above - £600 a month?. This may offer you some protection in terms of his pension as you may be a dependent alongside the children. You may also want to bear in mind that having a mortgage free property will make a considerable difference to your income needs and you are not subject to the vagaries of interest rates etc.

AT 57 he may very well continue to work for the next 8 years so I don''t think that global maintenance to age 11 for youngest would be unreasonable. It could revert to CM plus nominal SM after this time (or on his retirement).

So, in short my suggestion is:

FMH + £60k savings to you. You retain your pension.

135k savings plus 75k pension lump sum to him. He retains residual pension income.

Try for a global maintenance order of £600 a month until youngest starts secondary school. Thereafter reverts to nominal SM and CSA rate for CM.


Hadenoughnow

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