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What are we each entitled to in our divorce settlement?

What does the law say about how to split the house, how to share pensions and other assets, and how much maintenance is payable.

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Pension earmarking

  • 232HK
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16 Sep 12 #356197 by 232HK
Topic started by 232HK
Hi. This is my first question on Wikivorce, will try to keep it brief.

My husband and I are separated, soon to be divorced. We have just finished mediation quite amicably - we''re sharing the house, and I am to receive just under half of his net pension income (which he''s already receiving and pays the tax on). My understanding is that the pension is already taxed when I receive it and won''t be eligible for further tax.

However, I wanted to know whether the normal statutory tax free allowance on earnings will remain as it it, ie will I be able to earn the usual tax free allowance (@£9K) before I''m taxed on my own income? This is fairly crucial to the negotiations, as I''m going to be very strapped for cash without that. If I don''t get the usual tax-free income on top of the earmarking sum, I will re-negotiate on the child-care arrangements. Can anyone help?

  • The Divorce IFA
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17 Sep 12 #356297 by The Divorce IFA
Reply from The Divorce IFA
Hi,

As the earmarked pension has already borne tax (by your husband) it is not taxed again on you. It is not deemed to be your income for tax purposes.

Therefore, you have the full tax allowance available to use against your own sources of income.

Phil

  • 232HK
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17 Sep 12 #356298 by 232HK
Reply from 232HK
Great news, thank you :)

  • ian conlon actuary
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20 Sep 12 #356840 by ian conlon actuary
Reply from ian conlon actuary
Bigger question is, why Earmarking when pension sharing is more often the better solution. Earmared pension dies with your husband, pension share is in your name (and taxed as your income so both parties get to utilise their tax allowances).
Ian

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20 Sep 12 #356841 by mbird
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Hi Ian, quick question:am I right in thinking that due to the police pension reform at the moment, Actuarys are unable to provide accurate reports. I have been given this information by actuary and solicitor and just wanted to check with you as it didn''t sound right?
Sorry to hijack thread...

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20 Sep 12 #356849 by 232HK
Reply from 232HK
My husbands already in receipt of a pension income which makes pension sharing more complex, particularly due to our age difference (14 years)- in effect, in order for me to receive pension parity I would need to take a 70% pension share, which would leave him on very litte pension income,and at 65 he would become the vulnerable party (in other words it wouldn''t be allowed by the courts). In addition, I am 52 and therefore cannot draw down on a pension share for at least three years, which leave me without any income until then (I would prefer to draw down on a pension later in any case ). The pension payout would also be significantly reduced in annual income terms because I have so many more years to live than my husband.

I understand the disadvantages of earmarking, not least the limited-by-life nature of it, but having had advice from various divorce pension specialists and solicitors, we are all in agreement - it might not be a great situaton but our hands are tied by the age difference and the fact that my husband''s already in receipt of pension income.

I am speaking with my solicitor tomorrow to devise an offsetting arrangement to run in tangent with the earmarking order, to compensate for the likelihood of my income ceasing after 10 years or so, and also the fact that I don''t have any pension.

Thanks for your interest and advice :)

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20 Sep 12 #356857 by ian conlon actuary
Reply from ian conlon actuary
It''s not my view. There is protecton of benefits built up to date, the changes refer to benefits accruing over the future (from 2015 onwards).
Ian

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