sharing a pension in payment

I would be eternally grateful for some advice on the above. I've trawled through the forum and articles and though I've managed to glean some useful bits and bobs of info, I still can't find quite what I'm looking for.

Here are relevant things:

Husband 52
Wife (me) 55
No children
Married 31 years
Husband's adultery is grounds for divorce
Husband took early retirement at 50 and is in receipt of private pension.
There is approximately £150,000 in his pot.

He has agreed to my having half of this pension (I do not have a pension of my own, and will have a greatly reduced state pension on my retirement).

His pension company say that either a new income drawdown plan would be set up in my name or that I could use the fund to purchase a guaranteed annuity.

I would be so grateful if someone out there would explain the difference and perhaps the better option.

I'm still reeling from the shock of all this and would normally be on the ball and doing my own research, but am feeling a bit bogged down with all the other parts of the process at the mo. So, hoping someone can help.

Thank you in anticipation.

Hi,

There are number of issues for you to resolve regarding this. I have set out my thoughts below:

There are 3 options available when dealing with pensions on divorce.

1. Pension offsetting
2. pension attachment or earmarking
3. pension sharing

From the information provided, you are being offered a pension share. The share is to be dealt with by way of an external transfer (rather than an internal one - where you become a member of his scheme). A check of whether an internal transfer is available should be undertaken. Please do not assume that the internal route is not available.

In addition, the other options (1 & 2 above) should also not be discounted at this stage. If you want more information on these options I can provide this.

Turning to the proposed offer; if you agree to a 50:50 share you would receive a external transfer value of £75,000 and you would need to decide whether you want the income now or later. There is no option for you to draw tax free cash as the pension is already in payment. You will need to place this somewhere as you do not have a pension and a review of the available pension products should be done.

I would advise you check the valuation of the pension plan carefully to ensure that you are satisfied that the £150,000 does represent a fair and equitable value of his pension. There are so many pitfalls around valuations that extreme care is advised here.

In addition, it costs more money to provide an income to a woman than it does a man (its a longevity thing!). Therefore, there is an argument to say that you should need more of the pension asset than he does to provide the same level of income.

At this stage, it is difficult to advise which route is best for you. If you consider the outcome you are looking for first and then what your short and long term goals are, the most appropriate route can be deciphered.

A good Independent Financial Adviser will be able to assist you with:

- goals setting
- reviewing your options
- ensuring the valuation is correct
- advice on transfer / implemention (as appropriate)
- advice on risk
- provide ongoing reviews

I hope this helps. If you need anything further, please post again.

Regards

Phil

Please note: Although I am a Resolution Accredited Independent Financial Adviser my comments are given here as general guidance ­­­­­­­­­­­­­­­base­­­­­­­­­­­­­­­d on the (often limited) information available and does not constitute financial advice. They should not be seen as a substitute for detailed financial and legal advice.

Thank you so very much Phil for this excellent advice.
Would you be able to answer one more question for me please?

As I am now 55, am I right to assume that once I have my share of my husband's pension and say, buy an annuity for myself now, it will not start paying out until I am of retirement age, which I believe will be 63 for me.

Hi,

You are able to draw benefits when you like after taking an external transfer, which is one of its major attractions, so long as agewise you are over 50 now (and 55 at 6 April 2010) which you are. So there is no need to wait until age 63 (unless you want to).

Indeed, if you took an external transfer to an annuity it would start to pay the income out to you immediately. That is what an annuity is an income for life payable as soon as the transfer is received.

If you wanted to wait to draw benefits (until age 63) you would need to think about transferring to a personal pension arrangement and investing the money until your retirement. At this point you would then draw the annuity.

The benefit of deferring would be that as you get older the underlying annuity rate improves. In addition, if you intend to retire at age 63 do you need the income now?

So do you need the income now to meet your short term income goals, if so, an annuity might be appropriate.

Or will you retire at a later date. If this is the case you will need to consider an alternative to an annuity such as a stakeholder pension or a personal pension plan.

Regards

Phil

Please note: Although I am a Resolution Accredited Independent Financial Adviser my comments are given here as general guidance ­­­­­­­­­­­­­­­­base­­­­­­­­­­­­­­­­d on the (often limited) information available and does not constitute financial advice. They should not be seen as a substitute for detailed financial and legal advice.

Thank you again Phil.
You are a star!