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Pension reforms hold benefits for silver separators

From this April, people aged 55 and over became eligible to gain access to their entire pension pot, should they wish (so long as it is part of a defined-contribution scheme). Pension providers have said that this will make the process of gaining a divorce smoother for “silver separators”, because it frees up money that they might otherwise have had to find elsewhere. Typically, in a divorce, assets owned jointly by the couple, such as a house, may have to be sold so that the money can be divided between them. For those aged over 55, however, there is now be the opportunity to cash in their pension and use that for the settlement. This has the advantage that the house may not have to be sold, making the process far less stressful and drawn out. Previously, a pension could only be accessed after retirement, in the form of monthly sums paid out by the annuity purchased with the value of the fund. This is obviously of less use to someone than the lump sum realised by the sale of a house.Divorce among older couples is an increasingly common occurrence. Over the last 25 years, the number of couples divorcing has almost doubled, and is expected to continue to rise over the coming years. This is partly driven by longer life spans and better health, meaning that couples have more time together after retirement.Because pension provisions are a complicated part of a divorce settlement, however, couples are advised to consult an independent financial adviser before proceeding. Tax issues also come into play when accessing a pension as a lump sum, which must be weighed against the costs and inconvenience of selling other assets such as a home.The recent change will mean that the way pensions are valued and dealt with in a divorce is also likely to change in the future.
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