Pensions and divorce
Today is the official day that the state pension age rose to 66. That means that from 6th October 2020, anyone born between 6th October 1954 and 5th October 1960 will see their state pension age rise. Regardless of gender, anyone born within this range will receive their state pension on their 66th birthday.
And unfortunately, this is very unlikely to stop there given the government plans to continue to increase pension age over the coming years. The government plans are to increase state pension to 67 by 2028 and then to 68 between 2044 and 2046. That being said, with the recent coronavirus pandemic we have seen full proof that anything is possible and subject to change so these plans could change wildly for the better or worse. However, based on these figures, sadly it is likely that I will be working well in to my 70’s before I become eligible for my state pension.
This rise has angered many because this will mean that for many people across the UK, they will undoubtedly have to work for longer than they previously had to, shredding years off their retirement which they ought to be enjoying.
The new state pension will be £175.20 per week which generates an income of £9110.40 a year or £759.20 per month. This is an increase on the old state pension of £134.25 per week. To receive the full new state pension of £175.20 per week, you will need to have made 35 years-worth of NI contributions and you will need to make a specific claim for your pension, either by going online, by phoning or by making a postal application.
For those divorcing, an increase in pension age poses many issues. Some will have an average size private pensions, others may have different pensions and some no private pension at all. So how are they going to plan for their twilight years in the event of their divorce? No body ever wants to be in a position where they are having to choose between putting the heating on and putting food on the table.
First and foremost, you are going to need to make sure that you are fully aware of what pensions there are and how much they are worth. Most importantly, you want to know what INCOME these pensions are likely to generate when you are able to access them.
How can you possibly know if you are going to be able to live if you don’t know how much you will have to live on?!
It is entirely possible that in circumstances where one or other spouse has not worked during the course of the marriage – housewives/house husbands/carers of children – they have not made significant NI contributions. And if you haven’t made significant NI contributions then this will impact on the amount you will get from the new state pension.
If your income is going to be low from your state pension, how are you going to make ends meet?!
Well, in a divorce, the aim is to allow both parties to be financially independent from one another once the marriage is ended. To do this, capital, income and most importantly (for the purposes of this article), pensions are all available to be shared between the parties.
The classic example is a husband and wife, where the wife has not worked because she has been the home maker and therefore has not had the opportunity to earn an income and/or gain her own pension or only has a very small pension provision. Whilst this is less and less common, this is a prime example of why an order to share pensions is absolutely vital.
The court allows for pensions, including a State Pension, to be shared. The court, in the middle of a divorce or dissolution of a civil partnership, can decide that some of your State Pension can be shared with a former spouse or civil partner. However, to be able to do this, the court will need information about your State pension. There are complicated rules about what part of the pension can be shared depending on when you reached pensionable age. The important part is that you need to know what your State Pension is likely to be worth. I say this loosely because what you decide to do after your forecast is provided to you could impact upon how much your state pension is likely to be worth when you get it.
I know your next question is going to be – how do I get this information? This is the easy part, The government have an easily accessible form on their website, here – https://www.gov.uk/government/publications/application-for-a-state-pension-statement
You should complete the form BR19 and return it to them or you can complete their online form and check it online.
If you are divorcing or dissolving a civil partnership, both parties should be getting information about the forecasted value of their pension. This will undoubtedly help you, your spouse, your solicitors or legal representatives and the court, reach a conclusion about how respective pensions should be treated.
To find out what you are going to get out of the New State Pension, I would highly recommend that you read the specific guidance on the government website which can be found at https://www.gov.uk/new-state-pension/how-its-calculated.
Being armed with the right information will only help you better plan especially if you are the throes of a divorce. So, my recommendation to you, whether you are in the middle of a divorce, or not, is to find out what your position is going to be when you reach pensionable age – it might just change the course of your life.