Separation or divorce is a difficult time for you and your family. While it may be the last thing you want to think about, it's important to think about the impact your relationship breaking down will have on your finances.
In all circumstances, you should take legal advice before agreeing to any changes or taking action, but here's a short guide to help get you started.
If you divorce before you retire
When you get a divorce, a court will usually take into account any pensions that you or your spouse/civil partner has as part of the financial settlement that shares out your assets. This includes:
- Company pensions
- Personal pensions
- Additional state pensions
There are two ways of taking the value of both sides' pensions during a divorce. A pension sharing order can be made, which moves some or all of the pension value between you and your partner.
Otherwise, the value of your respective pensions may be taken into account during the financial settlement alongside your other assets, but the other assets moved between you to create the agreed balance.
Find out more about splitting pensions during divorce from MoneyHelper.
If you divorce after you retire
If you’ve already retired when you get divorced, it’s the retirement income that needs to be looked at.
These benefits may need to be split — especially if you have a joint retirement income or one that provides for your partner when you die.
The pension scheme or company that provides your retirement benefits will be able to tell you your options, so it's a good idea to get in touch with them.
Divorce and the State Pension
A court can’t order your basic State Pension to be shared if you divorce. But if you have any additional payments from the State Earnings Related Pension Scheme (if you retired before 6 April 2016) or an additional payment (called a “protected payment” or “excess amount”) under the new State Pension (if you retired after that date), then the court can rule that these are shared.
Divorcees who reached state pension age before 6 April 2016 can also use their former spouse or civil partner’s National Insurance contributions to increase their basic State Pension, if they don’t have enough qualifying contributions. This doesn’t affect the amount the other person receives. The increase in payments is lost if the partner remarries or enters into a new civil partnership.
What happens to your property?
You'll need to decide how to divide your property and possessions — including your home. This can be a difficult process, but you can get help and advice from www.gov.uk/divorce.
If you've borrowed money against your home with equity release, you should contact the company that gave you the loan. They’ll be able to explain your options. If you have a lifetime mortgage with Aviva, you can call us on 0800 092 5624.
Changing your will
It's important to review your will following a divorce because:
- Anything you gifted to your spouse or civil partner before your divorce will now go back to your estate (in most cases)
- If your will gifts everything to your spouse or civil partner, after a divorce it will be as if you hadn’t made a will at all (this is known as 'dying intestate')
- If your spouse or civil partner is listed as an executor or trustee of your will, this will no longer be valid following your divorce
Separation without legal divorce
Legally speaking, separation is the not same as getting a divorce. But if you decide to separate from your spouse or civil partner, it's likely you'll need to think about a lot of the same things and how they will, or will not, be affected by separation. Make sure you check your pensions, retirement income and will to see what options, if any, are available to you when you are separating.