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Spelling out rights on d-i-v-o-r-c-e

Pension sharing is intended to help divorcing partners make a clean break but may not be the right option in all cases

Sadly, the statistics show that close to 200,000 marriages will end in divorce each year. Forty-one per cent of first marriages are dissolved.

You can apply to the court in England or Wales for your marriage to be dissolved, provided that you or your wife is UK domiciled or has been habitually resident in the UK for at least one year before the application to the court is made. It is not possible to start divorce proceedings within the first year of marriage.

Before the court will dissolve the marriage, evidence has to be given proving that it has irretrievably broken down.

Divorce costs the Exchequer billions of pounds a year through the payment of legal aid and benefits. A number of court hearings may be necessary to establish your financial standings upon divorce. An important area to consider is pension provision.

The rules concerning pensions and divorce aim to help couples make a clean break rather than having to wait until pension benefits are paid on retirement. There are three opt- ions available – offsetting, earmarking and pension-sharing.

It makes sense for you to pay a fee to an IFA to receive detailed advice on each route before you go to court. Remember that the requirements are different in Scotland than in England and Wales.

Pension-sharing means that your former wife will get a percentage of your pension fund as a cash-equivalent value known as a pension credit. Your benefits will be reduced accordingly by an amount known as the pension debit.

You will need to build up other investments to cover the retirement income you may lose as a result of pension sharing. The cash-equivalent value will not just include rights accrued since you married but will include the period before you were married.

Your former wife’s pension credit can be transferred to another pension scheme in her own name. This is ideal for many couples as they can be independent after divorce, without any future reliance on maintenance, apart from that paid for the children.

But for many women, particularly those in their 50s, pension sharing is not necessarily the most attractive solution. Even if they do receive a proportion of their former husband’s pension, they will not be able to make contributions of their own to supplement it, so will not have enough income in retirement. They will still depend on receiving maintenance, where allowances can be made through future adjustments. Using the open-ended maintenance route also sidesteps the difficulties of valuing pension schemes.

Although there is a legal precedent of a 50/50 split of assets, do not assume that this will be the case. Consider the landmark ruling on Sir Martin Sorrell’s recent marriage break-up. The founder of the WPP advertising empire was ordered to pay his former wife a settlement worth almost 30m, one of the biggest in English legal history. But he managed to secure about 60 per cent of the couple’s 75m assets. This is the first time a judge has decided against a 50/50 split for a wealthy couple since an influential ruling in 2002 effectively gave equality to non-working wives.

You also need to establish what will happen to the matrimonial home. It may be that you agree to transfer your home to your former wife. Be aware that if you do trans- fer your rights in the home and later reconcile your differences and move back into the property, you will need to agree upon your rights.

If, for example, you continue to make contributions to the mortgage or pay for improvements to the home, you may think that you again have a beneficial interest in the property. But unless there is an agreement between you and your former wife, it will not be assumed by the courts that you have an equitable interest should your relationship break down permanently.

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