"Divorcees receiving a large lump sum instead of the drawn down pension need to be especially careful that they are investing the sum to make it last them through their retirement."
The financial adviser says that it is now common for a pension pot to be the second highest-value asset at stake in a divorce settlement, meaning that it can be difficult for divorcing couples to reach an equitable financial settlement without sharing or splitting a pension pot.
Salisbury House Wealth explains that divorcing couples seeking to split a pension pot have two options: a Pension Sharing Order, in which a share of the pension pot is transferred from one individual to their former spouse; or a Pension Attachment Order, in which the pension pot remains with one of the partners, but the income is divided when it is drawn down.
Statistics from the Ministry of Justice show that 18% of divorces where financial awards were made involved pension splitting or attachment orders.
Salisbury House Wealth noted that in their experience, one of the divorcing couple, more usually women, have often not been involved in the investment decision making process during the marriage. This means that, after divorce, they can lack confidence in their financial decision making, especially when handling large sums for the first time.
Tim Holmes, managing director at Salisbury House Wealth, said: “Pension awards can be a major financial windfall after a divorce, but without financial planning, the money might not hold its value.
“Divorcees receiving a large lump sum instead of the drawn down pension need to be especially careful that they are investing the sum to make it last them through their retirement.
“Divorces are a stressful time for both parties, but the financial decisions made then will have lasting consequences. Seeking third party advice can be helpful, particularly when dealing with pension arrangements which can be very complicated.”
