Minister of State for Pensions Steve Webb, speaking at a conference hosted by the Resolution Foundation, has pointed out how crucial it is that economically-weaker spouses, most often the wife, take their soon-to-be-ex-spouse’s future pension into account when addressing financial matters.
Steve Webb’s words are sound advice for anyone going through a divorce, who may have sacrificed their own earning potential and pension, through taking time out of the workplace to care for children.
It is as important for happily married mothers as those going through a separation. Many mothers feel that they must meet the cost of childcare solely out of their pay-packet, and find costs prohibitive when it comes to returning to work – as research from the Resolution Foundation tells us. If they do not return to work, gaps in pension payments then become a problem down the line for married as well as divorcing mothers.
Mr Webb offered advice to divorce lawyers: specifically that they should be “encouraged to always make sure this is properly part of the negotiations and is on the table”. This is, in fact, already a basic consideration for any divorce lawyer looking to get a fair settlement for a client, because pension information is included in Form E, the basic document for financial disclosure between parties in a divorce.
The issue of pensions is particularly apt at the moment because, from 6 April 2015, the new Taxation of Pensions Act comes into force. The headline effect is that it will allow people to take more of their pension as a lump sum upon retirement; the taxation effects will then differ depending on how much is taken. An individual will have the choice of buying a lifetime annuity; designating some, or all, of the fund to provide a drawdown pension; taking an uncrystallised funds pension lump sum; or taking a scheme pension.
For general information about different types of pension schemes and how these may be brought to bear on family law, take a look at Vardags associate Olivia Buchan’s blogs on the subject, here and here.
Vardags Limited is a limited company trading as Vardags, Company No 7199468, registered in England and Wales, having its registered office at 10 Old Bailey, London EC4M 7NG. Vardags is authorised and regulated by the Solicitors Regulation Authority (SRA Number 535955). The term “Director” is used to refer to a director of Vardags Limited or to a non-legally qualified employee or consultant of Vardags Limited with equivalent standing; the term “Director” does not necessarily imply that the relevant individual is a director of Vardags Limited. The term “Partner” is used to refer to a legally qualified director of Vardags Limited or a legally qualified employee or consultant of Vardags Limited with equivalent standing; the title “Partner” does not necessarily imply that the relevant individual is a director of Vardags Limited and does not imply that they are a partner in the legalsense. Our Partners are not liable for the debts, liabilities or obligations of Vardags Limited. A list of the directors of Vardags Limited and a list of the names of those using the title of “Director” or “Partner” together with their official status available for inspection at Vardags’ registered office. VAT number: 99 001 7230.