Few people who are going through a divorce or dissolution find the process easy: it can be long, messy and almost always painful. Even if there are no children involved, divorce or dissolution is a procedure that takes its toll on both sides: the acrimony, the paperwork – and the inevitable meetings with your solicitor.
It is understandable that many people who find themselves in this situation want to minimise the number of meetings they attend and simply let the solicitors get on with sorting it out.
Unfortunately, trying to cut down on meetings could be a serious mistake. Divorces are not just about broken relationships, dividing up the family home and agreeing arrangements for the children. They are about financial planning as well – and meetings with your financial adviser may turn out to be just as important as meetings with your solicitor.
Even if a couple have only been married or in a civil partnership for a relatively short time their financial affairs are likely to be inter- linked. Any mortgage is likely to be in joint names; they could well have shared protection policies and pension benefits may need taking into account when assets are divided.
Couples who have been together for longer – and an increasing number of people are now separating in later life – will find the financial situation even more complex. Pensions will certainly be an area that requires specialist financial advice as some people, particularly high-earners or those in final salary pension schemes, will have built up pension funds which could well be worth more than the family home.
The rules on pension sharing on divorce or dissolution provide a variety of options when it comes to dividing accumulated pension funds: they have also introduced the need for some complicated (and potentially contentious) calculations, making expert advice essential.
In many cases the partner taking on the role of main carer for any children after the divorce or dissolution sees the retention of the marital home as pivotal in providing stability and security, but does so to the possible detriment of their own long term financial security.
Often the marital home can be retained at the expense of pension provision. Pension sharing might not seem as attractive as the family home or indeed cash, but if one of the individuals in the marriage or civil partnership has little or no pension provision this may be short sighted. Individuals often see the immediate need and cannot visualise their own retirement.
It is possible to use the national insurance contributions of your ex-spouse or civil partner to help increase your basic state pension. It will not affect their basic state pension. However, if the individual remarries or enters into a new partnership this right is lost. It is important that a state pension forecast is taken into account when looking at your requirements in retirement.
On the other hand it may be that the marital home can provide funds into retirement by way of downsizing or equity release. Again this is where advice from a solicitor working hand in hand with a financial adviser is priceless.
All these areas mean financial advice can be crucial to making sure that any financial ‘damage’ you suffer as a result of a divorce or dissolution is kept to a minimum, and that you emerge with a clear idea of the financial strategy you need to take in the aftermath of the divorce.
None of us embarks on marriage or enters into a civil partnership expecting the relationship to break down, but if you find yourself in that position, seeking out financial advice will be one of the wisest decisions you make. A good financial adviser will help make sure that you receive the best possible financial ‘result’ from the divorce or dissolution and will work with your solicitor to see that everything runs as smoothly and painlessly as possible. Whether it’s helping to sort out the mortgage, reaching an equitable settlement of pension assets or any of the other complications that can arise, a financial adviser will be on your side, constantly giving advice with your best interests at heart.
