A financial expert has warned that thousands of couples going through a divorce are making a major pension mistake that they “will regret later on.” Sam Robinson, principal financial adviser at Almond Financial, said the error is “agreeing a financial settlement before properly assessing all pension assets.” He cautioned people not to assume their property is their biggest asset, explaining that workplace pensions accumulated over decades can be worth more.
Defined Benefit Pensions Often Overlooked
Robinson noted this is “particularly” the case for those on defined benefit pension schemes, also known as ‘final salary’ or ‘career average’ pensions. These provide a regular, usually monthly, retirement income based on salary and years of service, with payments rising each year in line with inflation. He told Sky News’ Money blog: “Overlooking them during negotiations can create a huge financial imbalance later on.”
Confusion Over Pension Sharing Orders
Robinson also highlighted that many divorcing couples misunderstand how pensions can be legally divided. “There's often confusion around pension sharing orders and what each person may actually be entitled to. Without specialist advice, people can agree to settlements they later regret,” he said.
MoneyHelper Advice: Always Include Pensions
The impartial MoneyHelper advice website says pensions should “always” be included in a divorce or dissolution. It noted that pensions can be worth more than someone’s home and are a “joint asset like anything else.” MoneyHelper said couples do not have to split or share pensions when separating, nor do they have an automatic right to claim some of their ex-partner’s pension. However, because pensions are often worth more than expected, they should be added to calculations when deciding “how best to split everything.”
MoneyHelper added: “You’ll normally need to decide how your pensions are split between you – they do not always need to be shared equally. You could consider using a mediator to help you decide. If you can agree, you’ll usually need a court to approve your agreement to make it legally binding – unless you live in Scotland and choose a pension sharing order. If you’re unable to agree, you can ask the court to decide on a fair split for you. Your pension providers then have up to four months to action any changes to your pension.”
