The house or the pension in a divorce
In a divorce, the family home and the pensions are often the two largest assets. How they can be divided, what keeping the house means for your mortgage, and why the two decisions should be made together.
In a divorce, the family home and the pensions are often the two largest assets. How they can be divided, what keeping the house means for your mortgage, and why the two decisions should be made together.
When a marriage or civil partnership ends, the family home and the pensions may be the two largest things to divide. They work in different ways. The home is something you can live in now. A pension provides income later and cannot usually be touched until the minimum pension age.
A settlement that leaves one person with the house and the other with the pensions can leave the two with different incomes in retirement.
In England and Wales, a court can deal with pensions in three main ways. Scotland and Northern Ireland have their own rules.
A share of one person's pension is transferred to the other, who then has their own pension.
One person keeps their pension, and the other receives a larger share of other assets, such as the house.
Part of one person's pension is paid to the other when it is paid out. This leaves the two connected after the divorce.
Pensions are valued in different ways, and a cash equivalent value may not reflect what a pension, particularly a defined benefit pension, would pay. A pension on demand report may be needed to compare like with like.
Keeping the family home usually means taking the mortgage into your sole name. The lender will assess whether you can afford it on your own income, including any maintenance you receive.
If you take the house in exchange for giving up a share of the pensions, you may have a mortgage-free home or a manageable mortgage, and less to live on in retirement. Ask what your income in retirement would be under each option.
Lenders may need the final order before they will lend, and some will accept a draft. Ask your broker early, so the mortgage is ready when the settlement is.
It depends on your income, age, the type of pensions and your plans. Take advice on both before you agree.
Some couples do, but both remain responsible for the whole debt. Lenders will need to agree to any change.
Not until it is paid out as income, which may be years away.
A solicitor or mediator handles the legal settlement. Your mortgage broker can tell you what you could borrow on your own and when lenders would need the court order.
How to value and divide the pensions, and what each option means for your retirement, are questions for a regulated financial planner. Ask your broker to introduce you to one, separately from your former partner.
This article explains how things work. It does not take your circumstances into account. Your mortgage broker can introduce you to a regulated financial planner at Equity & General where the question needs one.
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