Divorcees in dash to grab partners' pensions
Booming stock markets, historically high pension valuations and a raft of legislative changes have led to a 43pc rise in pension cash being split as part of divorce settlements.
The startling increase comes as the overall rates of divorce continue to fall across Britain, suggesting divorcees are increasingly targeting their former partners' pensions .
New Ministry of Justice figures show there were 11,503"pension sharing orders" in the 2016-17 tax year, compared to 8,027 in 2015-16, a 43pc increase. In 2014-15 there were 8,792.
Orders are issued by courts following a divorce or dissolution of a civil partnership – and set out what share of a pension an ex-wife or husband will receive.
Several converging factors are thought to be increasing lawyers' focus on pension assets. One reason is soaring share prices across many of the world's major stock markets.
Cash offers which transfer"final salary" type pension entitlements into other arrangements are also at record highs. Multiples of 40 are not uncommon: this means a £20,000 a year pension income is effectively turned into £800,000 cash.
A further factor is that since 2015 the"pension freedom" reforms have meant over-55s have greater control over how they use their savings. Where previously they were forced to buy an annuity, paying a monthly income, now they can make one or several cash withdrawals whenever they like.
Toby Yerburgh, a partner at Collyer Bristow, a law firm, said pension pots have been"an obvious target for years".
He said:"Their importance has kept growing. The bigger the value of these pension pots the more potential for arguments and misunderstandings."
"With the average transfer value of final salary scheme being over £210,000 there is a lot of stake, especially among higher earners."
Establishing a sharing order can cost thousands of pounds, depending on the complexity of the plan being split. With smaller value pensions, the need for an order can be avoided by one person taking the pension and the other taking a different asset, such as a property.
But, warned Ian Browne, of pension firm Old Mutual Wealth, higher pension values make this more difficult and sharing orders are often unavoidable.
Mr Browne said in some cases a divorcee would receive hundreds of thousands of pounds into a personal pension despite having no investing experience.
"They need to understand how to invest that for the future and ensure that when they do need to take income they do so tax efficiently."
Rules on pension sharing vary across Britain. In Scotland, the value of split pensions only relate to the period during the relationship, while in England all pension assets are taken into account.
While fewer people are getting divorced in total (down 28pc between 2005 and 2015) greater numbers of over-65s are both getting married and separating.
Office for National Statistics data published last month, but relating to 2014, shows a 46pc rise in the number of people getting married over 65, from 7,468 in 2004 to 10,937 in 2014. The number of men aged at least 65 divorcing also went up – by 23pc and women by 38pc over the last decade.
This rise is notable even in the context of an ageing population and the impact of the"baby boomer" generation, the ONS said.