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Offsetting pension difference

Posted by Hoops22 
Offsetting pension difference
March 19, 2021 12:31PM
Hi, I would be grateful for some advice on settling finances. Married 22 years. I'm 46, husband (petitioner) is 53. His pensions are worth at least £125k more than mine. He says our capital is equal, but i doubt this is true. I earn £300 more per month but will still have far greater outgoings. I will be staying in the family home with our 3 children (no mortgage). He's going to live with his mum. He wants us to keep our own assets and sell the house, 50/50 split, when our youngest turns 18 (in 7 years). I asked him for a larger share of the house e.g 60% of £550k to offset the pension difference but he won't budge. Do you think it's fair of me to pursue this?
Re: Offsetting pension difference
March 19, 2021 01:03PM
Basically you want £55,000 in cash for giving up a pension share with a value of £62,500. I can see why your husband said no - especially if you get to stay in the house and he gets to stay with his mum. Your claim to a pension share is simply not worth that much extra cash.
Re: Offsetting pension difference
March 19, 2021 02:54PM
Thank you Terry. This is such a great site. The house needs a lot of work, everything needs doing and he's only agreeing to pay half of essential maintenance and doesn't see anything in this category so i will need to pay many £1000s on repairs and saw the extra share as a way of recouping expenses. Don't think he'll move to the 55% mark either. Maybe I should try getting something in the settlement agreement to cover the work that needs doing?
Re: Offsetting pension difference
March 19, 2021 06:31PM
You won't get that either. Why should your husband pay for work to a house he doesn't live in? With the difference in pension values you are probably entitled to a pension share. You have a better chance of getting that. Possibly your husband might trade off some equity for no pension share but losing £55,000 in cash to keep a pension worth £62,500 wouldn't be attractive to most people. It would need to be a lower figure.
Re: Offsetting pension difference
March 20, 2021 09:04AM
Thank you David. We talked it out last night and he might give me 55% of the house so long as he doesn't have to pay for any essential maintenance. This would be a better option since we wouldn't be disagreeing over what work is essential. I know it's not nice for him that he has to move out and I'd like to know how this should be reflected in the financial split?

Our assets are: the house - £550,000, pensions - £200,000 (my work £75000 + his £125000 inc AVC), savings in the bank are equal
I earn £1900, he earns £1600, net per month. I also get the child benefit - £198 per month
The children are 16, 13 and 11 and will stay with me every night
We are currently still cohabiting and I spend £1300 per month, he spends £500 including £80 to his AVC pension and it's been that way for about 5 years
Re: Offsetting pension difference
March 20, 2021 11:57AM
Actually, on these figures we are not talking about dividing £125,000 worth of pension. Total pension assets are £200,000. Therefore if they were equalised your husband would need to transfer £25,000 worth of his pension to you. Even if you treated that £25,000 as the equivalent of cash - which it isn't - that would only mean you should receive 54.5% of the equity in order compensate you for not claiming a pension share. In fact because £25,000 in a pension is not the same as cash offsetting the pension with equity would probably take you to about 52% of equity.

However, it is not quite so simple as that. You earn £1,900 a month whereas your husband earns £1,600. Your also receive child benefit which takes your income to £2,098. Since the children will live with you your husband will pay child maintenance which for three children will be roughly 25% of his net income which is £400 a month. Therefore your net income will be £2,498 a month and his will be £1,200. Admittedly you will have the care of three children but your net income per month will be more than twice his.

When the children cease to be dependent the housing needs of you and your husband will be the same and, presumably, you will still be earning more than him. Personally I would say your husband's claim is to 50% of the equity and you may not even be able to get a pension share because the difference between your pensions is not that great so it may not be worth incurring the cost and you earn more than he does. That is not to say that he might not offer you 55% but personally I struggle to see the justification for it.
Re: Offsetting pension difference
March 20, 2021 01:03PM
Thank you very much David. Sorry, i put the wrong pension amount. His is £200,000, mine is £75,000. So does this make 55% fair?



Edited 1 time(s). Last edit at 03/20/2021 01:57PM by Hoops22.
Re: Offsetting pension difference
March 20, 2021 05:54PM
Yes, those are different figures which would make it broadly fair.
Re: Offsetting pension difference
April 03, 2021 09:39AM
Hi David, the CETVs have come back a bit different. Mine is £78000 and his is £210000. Is equity about 50% of the cash equivalent or is it more like 60%? I don’t want to settle at 55% and have regrets later. Your advise is much appreciated.



Edited 1 time(s). Last edit at 04/03/2021 09:40AM by Hoops22.
Re: Offsetting pension difference
April 03, 2021 12:32PM
I really don't think it is a matter of simply asking for a greater share of the equity and getting it. Your husband obviously thinks the house should be sold at some point in the future and the equity divided equally. It would be perfectly reasonable of him to say, 'I want half the equity and you can have half the pensions'. That way your each get six apples and six pears instead of one getting 9 apples and 3 pears to the others 9 pears and 3 apples. A court is likely to see it the same way because that divides different asset classes equally.

Whether you could forego some pension share in return for a greater share of the equity depends on your husband really and what importance he attaches to each. Since it would be a matter of negotiation it really doesn't much matter whether you say £100,000 in a pension CETV is worth £50,000 or £60,000 in cash. Unless he wants to enter into that negotiation a court would be more minded to divide equity and pensions equally. If he is prepared to enter into that negotiation the outcome will depend upon your respective priorities rather than upon any formula.
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