Major pension ‘mistake’ thousands of couples are making – ‘will regret later’ | Personal Finance | Finance

A financial expert has revealed “one of the biggest mistakes” couples going through a divorce are making with their pensions. Sam Robinson, a principal financial adviser at Almond Financial, said the error is “agreeing a financial settlement before properly assessing all pension assets”.

He cautioned people not to assume their property is their biggest asset, explaining workplace pensions accumulated over decades can be worth more. The expert said this is “particularly” the case for those on defined benefit pension schemes. Sometimes called ‘final salary’ or ‘career average’ pensions, these give a regular, usually monthly, retirement income based on salary and years of service at their workplace.

The payments also rise each year in line with inflation.

Speaking to Sky News’ Money blog, Mr Robinson added: “Overlooking them during negotiations can create a huge financial imbalance later on.”

He also told the broadcaster that many divorcing couples misunderstand how pensions can be legally divided, which can lead to people making decisions they go on to regret.

Mr Robinson said: “There’s often confusion around pension sharing orders and what each person may actually be entitled to. Without specialist advice, people can agree to settlements they later regret.”

The impartial MoneyHelper advice website says pensions should “always” be included in a divorce or dissolution.

Echoing Mr Robinson’s comments, it, too, said that pensions can be worth more than someone’s home and are a “joint asset like anything else”.

MoneyHelper said couples do not have to split or share pensions when separating, and also do not have an automatic right to claim some of their ex-partner’s pension.

But as pensions are often worth more than expected, it said they should be added to calculations when deciding “how best to split everything”.

MoneyHelper continued: “You’ll normally need to decide how your pensions are split between you – they do not always need to be shared equally. You could consider using a mediator to help you decide.

“If you can agree, you’ll usually need a court to approve your agreement to make it legally binding – unless you live in Scotland and choose a pension sharing order.

“If you’re unable to agree, you can ask the court to decide on a fair split for you. Your pension providers then have up to four months to action any changes to your pension.”