New data reported in the Financial Times makes interesting reading for anyone involved in divorce financial remedy proceedings. Particularly where matrimonial assets exceed £1 million.
Divorces Where Assets Exceed £1 Million
Researchers combined analysis from the Office of National Statistics relating to wealth and assets with the projected number of divorces. They estimate that 550 marriages where there are more than £1 million in assets will end in divorce in England and Wales this year. On average each couple will have around £3.5 million in assets. While there may be a perception that most family wealth is tied up in property, in fact the research reveals that only 31% of the wealth of high net worth couples is invested in property. 43 % of these families’ wealth is held in private pensions.
How We Can Help
At Brookman Solicitors in London we regularly handle high net worth divorces for both pension-owning and non-pension owning spouses. Thirteen years ago the firm was involved in the Court of Appeal case that first established clear rules on pension division. And we still concentrate heavily on this area of family law.
How Is A Pension Divided In Divorce?
The research published by the FT doesn’t surprise us at all. In our experience the pension pot is often the largest single asset to be divided in a financial settlement, especially if there is a high level of family wealth. In the context of divorce the decision on what to do with the pension of one spouse is complicated by two factors:
- How to value an asset that is designed to provide an income source at some point in the future
- Deciding which court order to apply for to deal with the pension
Valuing The Pension
The starting point of financial discussions in any divorce is the process of disclosure of assets. The research from the FT shows that when it comes to pension details, full disclosure is more important than ever. Advice from a solicitor who specialises in this area is often essential. At Brookman for example, because we regularly act for both sides in high value divorces, we know the level of detail required to ensure full disclosure (by the pension-owning spouse). And if we are acting for the spouse seeking to establish his or her share of a pension we can quickly spot whether or not the other side is being transparent. Sometimes valuing a pension – particularly a large, private pension – will often require the services of an actuary or financial accountant. And we have built up a network of trusted advisers over the years.
Types Of Pension Order
We have discussed what happens to a pension on divorce before. Broadly speaking there are three types of order available:
- A pension sharing order where pension assets are formally divided on divorce. It’s essential to get appropriate advice when working out respective percentages of the pension
- Pension offsetting orders which substitute the value of a portion of the pension with some other asset, for example a specific share in the family home or the equivalent cash value
- Earmarking orders that enable one party to receive a proportion of pension income when the pension-owning spouse starts to draw down payments
At Brookman we work hard to find negotiated financial agreements between our clients and their spouses. This helps avoid the anxiety and expense inherent in a full-blown court hearing. But even if an agreement is found it is still essential to ask the court to approve any pension order so that both spouses have certainty about the legal enforceability of the pension arrangements that have been agreed.
If you would like to get in touch with one of our specialist divorce solicitors please call us on 44 (0) 20 7430 8470 or contact us online.