The Divorce IFA

Pension Sharing on Divorce – Frequently Asked Questions

Posted March 4th, 2011

“I am about to receive a pension sharing order and need advice about investment”

This is a very popular question and the first thing I always do is to double check the information provided on the pension sharing options with the existing pension scheme.  The reason I double check is often the information provided to the spouse is appalling and it is often incorrect.  I see misinformation provided on a daily basis!

Internal transfer or external transfer?

Sometimes the pension scheme will offer an internal transfer of benefits and you can remain in the scheme.  Often the benefits on offer to you are good and worth staying in the scheme for.   You should be looking for true shadow membership.

But if you have to exit the scheme (and this is very common) it is necessary to check what schemes are available for the pension credit to go into.  Questions to consider are:

• Do you have any personal pensions already?

• Do you have a works scheme? And can this take the transfer?

• If not, what is on offer from the market.

Advice on the most suitable pension to transfer your pension credit should be taken.  Ensure your adviser is suitably qualified.  The Financial Services Authority insists on a certain level of qualification to undertake this work.

Investment

On an external transfer the investment of the pension will be important because you will be taking on two new risks – how it performs between now and your retirement and how much income you will eventually draw out at retirement. 

If you are a long time from retirement you could consider investing in growth assets (equities/property) which tend to be more risky or if it is a short time to retirement more defensive assets (cash / gilts) to protect your capital value.  Setting a goal in terms of retirement income is also advisable.

When working with my clients I undertake a thorough review of their attitude to risk and tolerance to risk, their options in terms of pension sharing and from this provide advice on the most suitable pension arrangement and investment strategy to meet their goals.

If you would welcome some assistance on your pension sharing order, your options and how to get it implemented, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk

Tags: external transfer, internal transfer, Investment, Pension, Pension Credit, Pension Scheme, Pension Sharing, Pension Sharing on Divorce, Pension Sharing Options, pension sharing order, Personal Pension, Retirement, Shadow Membership, Transfer | Posted in Pension Sharing |
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Pension Sharing – Internal versus external transfers

Posted December 3rd, 2010

Do you know the difference between an internal transfer and an external transfer in relation to pension sharing?

It is important that you do because the consequences of choosing the wrong one can be expensive.

Internal transfer – this is where the pension scheme deals with the pension share by way of an internal transfer of benefits between one party and the other (no benefits transfer away from the original pension scheme).

A pension credit is created and this will either be dealt with by offering shadow membership (i.e. matched benefits with the existing scheme – final salary for example) or alternative benefits will be offered. Sometimes these can be significantly less valuable than exact shadow membership and so it is worth checking first. Sometimes you have a choice other times you don’t.

The other route is an external transfer – this is where the pension scheme involved deals with pension sharing by way of an external transfer. i.e. they insist that the pension credit be transferred out to a new arrangement of the pension credit holder’s choosing. Therefore, these benefits are automatically different to the existing (final salary) scheme but which scheme should you transfer to?

So it pays to check what is on offer when pension sharing before entering negotiations. If you know that shadow membership is available this can be very valuable. But what if you have to transfer out would you know what to do?

I keep a check on which pension scheme offers what. If you would like to know more about internal and external transfers when pension sharing, please contact me on 0800 092 1220 or send me an email – phil@thedivorceifa.co.uk

Tags: Alternative Benefits, external transfer, Final Salary, internal transfer, New Arrangement, Pension, Pension Credit, Pension Credit Holder, Pension Scheme, pension share, Pension Sharing, Shadow Membership | Posted in Pension Sharing |
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