4 financial considerations when dealing with Divorce

Divorce is a life-changing event that can be emotionally and financially challenging. From dividing marital assets to reassessing long-term financial security, careful planning and understanding are key to reducing stress during this process. Below are some important financial considerations to bear in mind:

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1. Pensions: The Overlooked Asset

Pensions are often the second-largest marital asset after the family home but are frequently misunderstood during the division of assets. Here’s what to know:

• Pension Valuation:
  • Pensions are valued using the Cash Equivalent Transfer Value (CETV). This value reflects what the pension would be worth if transferred and can often differ from the fund value due to transfer fees.
  • Request a CETV from your pension provider, dated at the time of separation. This helps determine how much of the pension wealth was accumulated during the marriage.
• Defined Benefit Pensions:
  • Pensions such as final salary schemes are more complex to value. Consulting a Pension Actuary early in the process is essential to get an accurate valuation, as this can take time.
• Pensions on Divorce Expert (PODE):
  • If a report has been prepared by a PODE, a financial planner can help you understand its implications and how it fits into your overall financial plan.
• Multiple Pensions:
  • Individuals often have several pensions, such as workplace pensions, personal pensions, and the state pension, all of which need to be assessed for equitable division.

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2. Loss of Employer Benefits

Divorce may result in the loss of employer-provided benefits that were shared within the marriage, such as:

• Death in Service Life Assurance: Financial protection for loved ones may need to be replaced.
• Private Medical Insurance: If covered under your ex-partner’s employer plan, you may need to arrange and fund your own policy.
• Company Car or Travel Benefits: Access to these perks may no longer be available.
• Company Pension Schemes: These are vital for retirement planning and should be considered in the division of assets.

Replacing these benefits can be costly, so it’s important to identify which ones are essential and plan for how they will be funded.

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3. Key Financial Questions to Ask Yourself

To ensure financial security post-divorce, ask yourself:

• Protection Needs:
  • Will my new mortgage or liabilities be repaid if I die or suffer a critical illness?
  • Do I need to secure life or critical illness cover?
• Income Security:
  • Will I have enough income to cover monthly expenses if I cannot work due to illness or accident?
• Retirement Planning:
  • If I’m now solely responsible for my retirement savings, do I know how much I will need, and am I saving enough to achieve this?

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4. Why Speak to a Financial Planner?

Navigating divorce is complex, and there’s no need to do it alone. A financial planner can:

• Identify potential risks to your financial security.
• Help you adjust your financial plan to meet your new goals.
• Offer tailored advice to ensure your assets and income align with your future aspirations.

Divorce is not just a legal process; it’s a financial one. Seeking professional financial advice can help you move forward with confidence and security.

Contact TJD Financial Services
Divorce can have significant financial implications, especially when it comes to pensions, assets, and long-term security. Tracy and the team at TJD Financial Services are here to guide you through this challenging process. With expert advice tailored to your unique situation, we can help you navigate the complexities of dividing assets and planning for your financial future after divorce.

Reach out to TJD Financial Services today to ensure that you are making the best decisions for your financial well-being during and after your divorce, and take the first step towards securing a stable financial future.

The value of investments and any income from them can fall as well as rise and you may not get
back the original amount invested.

Approved by The Openwork Partnership on 4/12/2024