Posted May 26th, 2011
Once a divorce is concluded there is often the temptation to tidy up your financial matters immediately as a fresh start. But could this inadvertently cause potential issues later which could be avoided?
For example, it is common for people to consolidate pensions into one scheme (perhaps a SIPP) without too much thought to the consequences. But if the existing scheme is subject to a pension sharing order then under the legislation it is not possible for another pension sharing order to be placed against it.
By transferring away to a new arrangement this “protection” is lost and should the client get divorced again there is a potential for this new scheme to have a pension sharing order placed against it. There is also the same issue when clients’ purchase annuities at retirement.
So would it be an idea to consolidate before settlement so that the protection of the pension sharing order remains.
If you are considering your options post divorce and would like some advice, please do not hesitate to contact me on 01204 663904 or email firstname.lastname@example.org
Posted August 23rd, 2010
In my last blog entitled “Self Invested Personal Pensions – What are the risks?” I set out the wide range of investments into which a SIPP can invest.
With some divorces taking years to conclude it is important to consider what risks are being taken within the SIPPs.
One of the highest risk investments that could be encountered is private equity or unquoted shares. This is an investment into a private business often one which the SIPP member has a stake in privately or an interest in.
The key here is that this is usually a small business with a closed shareholding which are not quoted on a recognised stock exchange.
The attraction of holding unquoted shares in a SIPP is that any profits (which can be high given the high risk being taken) are free from capital gains tax. However, the risk of failure is very high and so for many SIPP providers this is an investment which is to risky for them to allow.
The main issue for the providers is the lack of liquidity and the difficulty of obtaining a valuation. Just like business valuations such investments need to be handled with care and the use of an accountant who specialises in business valuations is highly recommended.
If you would like an impartial review of the SIPP involved in your divorce, please contact us on 0800 092 1229 or email email@example.com