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In a divorce settlement how can a pension fund cash value be considered equivalent to other assets such as cash in the bank or the house. A pension is subject to income tax on withdrawal of up to 40% and it cannot be used at all until the age of 55. As a result the comparison to assets that can be spent today and have no tax attached is incorrect. Ie as an example I would rather be given 400,000 cash today than 500,000 in a pension fund I can’t access for 20 years and I will pay tax on when I can access.
Replies (1)
Pension valuations are not considered the same as cash assets by the court. All assets are looked at, but as you rightly say, cash today (for example from the sale of property or savings) is considered potentially more valuable than pension in the future. When splitting assets this should be taken into consideration, along with other factors such as providing for any children, your age, your income, and ability to provide for yourself (which may be diminished if you have stayed at home to raise children for example) .
A CETV (Cash Equivalent Transfer Value) enables you to compare pensions with pensions. It’s not as simple as adding everything up and dividing by two – which is why you should speak to one of our divorce coaches or seek legal advice on your specific circumstances. You can book a free 15-minute advice call here.