Podcast: Pensions and divorce with adviser Pete Matthew
11 July, 2017
Our short podcast with financial adviser Pete Matthew tackles this jolliest of subjects.
Matilda, in her 40s, contacted us with a question about pensions and divorce. Here's what she wanted to know.
“I was wondering if someone can give me some advice about investing my pension with the right people. I am in the middle of a divorce and am getting half of my husband’s pension which has now been submitted to the court. I am still waiting for the pension sharing order to be issued but in the meantime I was hoping to find a good company to invest my pension with.”
We get this question a lot and I wanted to chat to a financial adviser who could help with some practical tips and ideas. Chartered Financial Planner Pete Matthew helped out and this 10 minute podcast shares some ideas, things to consider and pension providers which we think might be worth considering. (NB As always, this is general guidance and help only – at Boring Money we’re not allowed to give “financial advice” and we’re not covered by the regulator. Pete of course is regulated and fully qualified so feel free to contact him if you’re in the market for full financial advice. He’s also very nice!)
Here’s a summary of some of the key issues we discussed.
So Pete, when it comes to pension assets, what do people who are getting a divorce need to be aware of?
"Pensions can either be shared/split on divorce OR part of one spouse’s benefits can be “earmarked” for the other. The former allows for a clean break between the partners. Part of one spouse’s pension pot is separated off, and the money paid into a pension for the other spouse. Note that it can’t be taken as cash and put in the bank.
"Earmarking means a note is placed on one spouse’s pension and when he/she comes to take benefits one day, part of those benefits will be paid to the other spouse. This means that spouses will need to keep in touch between the divorce and retirement age. This is a bit messy, and so sharing is infinitely preferable.
"Your correspondent will need to balance up the fact that the pension money she will receive will not be accessible until she is 57. Presumably the rest of the divorce settlement allows for her immediate needs, and the pension is ‘gravy’ on top of the necessities (hesitate to call it that, but you get what I mean!)."
So what do people actually need to do with this pension sharing order?
"She will have to decide where she wants this money to be paid. If she has existing pensions it could be paid into that. She will just need to provide the details to her husband’s scheme to allow the transfer. There will be a form that her current scheme requires to be completed too.
"Her comfort in retirement is now entirely down to her, so when the dust settles on the divorce in a year or two, she should look to maximise her own savings towards her retirement."
Where might she choose to hold her pension?
Well, Holly Mackay, MD, has some suggestions for Matilda to consider.
“The first thing I’d suggest is to find somewhere which won’t charge you exit fees. You may want to review stuff or change these arrangements once the dust has settled and if so , you don’t want to be stung if you take your money out.
“Matilda also confirmed that she is not a confident investor so somewhere where she doesn’t need to make loads of investment decisions feels sensible. It also makes sense to at least start with a low-cost option so fees don’t eat into your returns too much. This suggests that a passive portfolio is a sensible idea for now. [There are videos explaining this more on the Funds section of the site.] Here are three options Matilda might like to consider:
“One option is Aviva (http://www.aviva.co.uk/personal-pension/), which is low cost and has a good, easy to use website. Standard’s Life (https://www.standardlife.co.uk/c1/accounts-and-services/pensions.page)pension account is more expensive, but it has a good range of funds and decent web capability. A bit further up the scale are Bestinvest (http://www.bestinvest.co.uk/sipps), Fidelity (https://www.fidelity.co.uk/investor/pensions/fidelity-sipp-var2.page?utm_expid=19366235-113.JphDXyZTRXiAMpbyTI2cFw.2&utm_referrer=http%3A%2F%2Fwww.boringmoney.co.uk%2Fpensions%2Fprivate-pension%2F)and Hargreaves Lansdown (http://www.hl.co.uk/pensions), all of which offer good value, have a wide selection of funds, help to pick stuff and the websites are decent too. You can see more in our pensions Best Buys on the Boring Money website.
“Any of these options will certainly tide you over and when things ease up a bit you might want to seek some financial advice or have a think about moving or adding some more investments to the mix. But all of these options are decently priced, will keep you invested and don’t lock you in with nasty exit fees in case you want to move when life gets a bit less stressful. Good luck.”
Private pension (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/private-pension/)
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