New pension freedom rules unlock divorce payouts

More couples are reportedly getting divorced during the later stages of their lives, a phenomenon called the grey divorce that we have written about here.

It is thought that the introduction of new pension freedom rules in April 2015  might be contributing to this increase in later years divorce.

The pension rules mean that anyone aged 55 or over is able to access their pension funds in order to invest the money as they see fit.

As a result divorcing couples can now split their pension based assets and combined wealth more easily.

For most couples, a pension will be the second largest asset after their home, and in some cases it can be worth more.

Before the new rules were introduced, pension pots were a source of difficulty for couples going through a divorce. Many people could not access their pension funds until they reached 65 and even then could only buy annuities – regular monthly pension payments – with the funds.

The new rules change everything in that the pensions that have been saved over several decades can now be accessed as cash.

While there are tax implications to consider when more than 25 per cent of a pension’s total value is withdrawn, the greater flexibility in how to access pension assets and distribute them could be a major advantage.

Couples going through divorce need to be informed about their choices.

There will be pros and cons in any decision and those need to be carefully evaluated. For example, while taking more cash up front can seem attractive it can leave people in real difficulties later in their retirement years if their income dries up.

The tax costs and savings in cashing in pension assets or sharing a pension fund is likely to need specialist financial advice as well.

Our specialist family law firm often works alongside the family’s existing financial adviser to make sure that couples get the full range of advice that they need. Alternatively they are able to recommend suitably qualified independent financial advisers for this purpose.

Too many couples go for a quick fix when it comes to pensions, perhaps where one partner keeps the house and the other person keeps the pension. Those decisions can act against one or both parties’ interests further down the line. We help clients to understand their choices and to make informed decisions so that they avoid the expensive pension pitfalls that could otherwise lie in wait.

If you are thinking about divorce or separation, or know somebody who is, then get in touch with Diane Genders Solicitors in Lincoln on 01522 516500. Alternatively you can email in confidentiality to and ask to speak to one of our team of specialist divorce solicitors.