What happens to pensions upon divorce?
Nobody ever wants to hear of divorce or ever think that their vows can be broken. However when the dreaded divorce does happen you have to be ready in all aspects, and let your heart get ready. However when divorce does happen many people always think of the family house and but pensions also need great consideration.
Pension and pension benefits always come later when the process has already started taking place. This is usually a hard knock on their heads as they realize it is much more valuable than probably their houses.
However before deciding on anything you should really do your best to get information on how to separate the pension fairly so that you can both benefit. Getting the information early will help you know the value of the pension and what to do when dividing the assets.
There are different types of pensions that exist, some are:
If you or your soon to be ex-spouse are self employed, you probably are in the private pension scheme. When splitting the pension check on how much you two have contributed and decide on how much each will get, however ensure you do this fairly.
These are usually available to public servants, teachers, the police and the army. This is usually protected from inflation and thus one can get the pension that is due to them without worrying that it won’t come as what they expected. However this is not up for sharing and belongs to the individual who worked and also cannot be earmarked (a part of the pension is considered yours upon retirement of your mate).
Other types of pensions are the Public service schemes and the Employer pensions.
What are your options when it comes to pension?
When it comes to pension sharing, you and your soon to be ex-spouse have a number of options
This is where you decide to trade off a certain asset you and your spouse share . For example if your house costs the same as your pension, you can decide to either take the house or the pension, so that you do not have to encounter your spouse once the divorce is final.
Earmarking is whereby a share of your spouse’s pension is considered yours. However, you should try to avoid this option as it comes with a lot of baggage. The pension is usually tied to the life of your spouse thus with the death of your spouse the pension also dies. In addition if your spouse decides on a specific age in which he/she wants to get the pension, you also have to wait until they reach that age regardless of the circumstances you are in. thus always making you depended on your spouse for life.
3. Pension sharing
Pension sharing is whereby the pension is divided into different ways that you two have decided upon. It is usually the best alternative as you are left depended on yourself and not on your spouse. However, you should agree on this as quickly as possible so that you can start enjoying the benefits early enough.
Value for pension
When it comes to sharing your pension ensure that you check o all other factors such as money available and other investments made. The pension benefits usually provided by the scheme provide ( cash equivalent transfer value) represent the value of benefits available .However this usually fails to consider the other investments and benefits available or the spouses rights that come with death of their spouse. It may also fail to acknowledge other minor complications between the two of you thus giving far less than it should be. Thus having a pension audit is the best option as it gives you the best estimate to the real value. This is because there is usually an underestimation on the value given by the CETV. However doing a audit will also be beneficial as your with drawings will be upped and thus truly get the pension you deserve.
Even though divorce is see as a very hard and traumatizing this, try and get your emotions in order first and get your assets checked and divided fairly, thus when you have this you can take time off and grief, you will have something to lean on to.