This post is the final blog in a three part series covering armed forces pensions, In the earlier blogs you will have seen that armed forces pensions is a complex area to deal with. There are several different schemes which affect what can be drawn from the pension and when. I normally find that the pension holder often knows quite a lot about the pension and can give a lot of helpful information at an early stage. Particularly when they have served in the forces for around 20 years and are possibly thinking about leaving and moving into civilian life.
Whether you are the pension holder or the non owning spouse there are a few questions you should ask yourself as soon as possible if you are separating from your spouse.
Questions to ask yourself
- When is the pension holder due to leave the armed forces?
If this is soon, and by soon I mean in the next 6 – 12 months, then you should each obtain legal advice from a family law solicitor as soon as possible. They may also refer you onto a pension financial adviser. The reason you should seek advice sooner rather than later is because if the pension is drawn down before advice is taken, and possibly before a pension sharing order is made (if there is to be one), then this can prevent you from each maximising the benefits available under the pension.
- What is your priority – capital now or provision for retirement?
In an ideal world, there will be enough money to share the capital and re-house everyone as well as enabling a pension sharing order. However, this often isn’t the case, particularly if the parties are in their 40’s or 50’s with dependent children. It is quite common for the equity in the home to be a similar amount to the value of the pension, if the separation is taking place around the time the serving member is considering leaving the forces. Capital in a home and funds in a pension are two completely different assets and cannot really be compared against one another but it is human nature to want to compare the values.
If there are limited funds to re-house everyone then this is why you need to give consideration to your priority. Is knowing that you have enough to remain on the property ladder one of your more important aims? Or would you rather know that there is a reasonable provision upon retirement for you? Only you can answer what your priority is but I would certainly explore the options available with you to help you understand your choices.
- What is the likely lump sum from the pension, or any other lump sum payment upon leaving the armed forces?
If the departure from the army is likely to happen in the next couple of years, it is important to find out what lump sums will be available at that time as these can be used to increase the housing pot. However, the larger the lump sum taken from the pension the lower the income stream will be.
It can be a balancing act to work out how to maximise what is available under armed forces pensions, between obtaining a lump sum and keeping the income stream as high as possible. It is far too easy to underestimate the true value of an armed forces pension and the benefits it can bring. Ultimately, it is an extremely important asset to protect.
To discuss your specific situation please do not hesitate to contact me or call 02392 000086.