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HomeMoneyI’m a pensions expert and women miss out on £130,000 free cash...

I’m a pensions expert and women miss out on £130,000 free cash due to crucial mistake – here’s how to avoid it

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THOUSANDS of women are making a mistake each year costing them £130,000 on average.

That’s how much it’s estimated they miss out from their partner’s pension when getting divorced.

Pensions are often a couples second biggest asset and should be considered when divorcing

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Pensions are often a couples second biggest asset and should be considered when divorcingCredit: Hymans

The figures from Hymans Robertson, a pensions and investment firm, suggest that more than 15,000 women each year risk losing out on income in retirement.

That’s because they fail to consider pension savings when splitting assets during a break up.

And with women already short changed when it comes to pensions – with savings worth thousands of pounds less than men’s – it could make all the difference for a secure future.

Women are more likely to take time away from the workplace to look after kids. That means they are often contributing less to their pension during these periods, and sometimes nothing at all.

Women are also more likely to have smaller pensions as a result of unequal pay throughout their career.

When divorcing, assets are usually shared between the couple – but pensions are often ignored even though they are usually the second biggest asset a couple has, after property.

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Kathryn Fleming, pensions expert and partner at Hymans Robertson, has shared her top tips so you don’t make a crucial mistake that means you miss out.

She is talking about workplace pensions which is different to the State Pension – but some divorced women could be owed cash form this too.

Include pensions in your split

First of all, consider pensions when splitting up. All too often more immediate finances are sorted out like the family home and child support.

But a couples pensions should be counted too especially now more people than ever have a pension – more than 10million workers are now enrolled in a saving scheme automatically.

Kathryn said: “It is really common for people to have pension savings nowadays as for a number of years employers have been auto-enrolling people into a pension scheme, so make sure to insist that pensions are included in the split of money.

“Once you have got pensions included, make sure ALL pension pots are considered,”

Understand the value

You could ask your partner to track down all their pensions, she suggests.

“With so many people changing jobs in their lifetime, there can be pensions that are ‘lost’. The Government has a free tracing service that helps people find them,” she said.

The latest estimates suggest that more than 200,000 pension savers could be owed surprise cash from a pension pot they’ve forgotten about.

“When asking your partner about pension values, make sure to also ask what kind of pension it is and if there are any guarantees,” Kathryn says.

“This will help you understand the true value of the pension. For example, are there are any protections such as a retirement age or tax-free cash?

Kathryn said: “It can be hard to know where to go to find out the value of a pension and the best place to start is the pension provider, but if your partner doesn’t know who that is then someone in their HR team from their employer should be able to tell them.”

“Pension schemes will typically send members a statement once a year – this will set out the name of the scheme, who the provider is and how much the pension pot is worth.

These statements are really helpful to get a sense of how much money has been saved, and can help determine what partners would be entitled to,” she said.

Including all pensions and their true value means when splitting assets you can do this accurately.

Get advice

Divorce is far from a walk in the park, and pensions are not always the easiest to understand.

So getting help can mean you don’t miss out.

“Take advantage of the free help which is out there – look at the tips on website, or speak to someone, at Money Helper,” said Kathryn.

“These are free services that will help you find out much more about pensions and divorce. 

“It also helpfully gives a steer from when legal aid may be relevant.”

According to Money Helper you can’t get legal aid In England and Wales to ehlp with the legal costs of divorce or dissolution, unless it involves domestic abuse.

You could get other help towards the cost though, like £500 towards mediation services.

Legal advice can be worth paying for especially in complicated circumstances, but there are DIY options.

Understand your options

Once the value of pensions has been worked out, there are different options for splitting the asset.

These are pension sharing, pension offsetting and pension earmarking or attachment.

They each have pros and cons, and suitability depends on your specific circumstances.

Kathryn said: “Sometimes pensions are offset against the value of the family home, this is often the simplest way to share a pension in divorce, but before agreeing to this option individuals should take advice. 

“Pensions change in value, in a very different manner compared to how houses change in value, and they have different tax systems in place for each.

“Pension Offsetting is an approach that can likely to lead to someone not having enough money in retirement. 

“Pension Sharing is a much more complicated approach, but it is more likely to lead to a better financial position longer term. 

“Make sure you consider all approaches and determine what will work best for you in your circumstances.”

Pensions will rise by rate of inflation next year as triple lock broken, DWP boss confirms

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