We, at Carbon, call ourselves financial planners for a reason: one of the biggest parts of our job, and often the part that brings the most value to a client, is the planning, rather than the selection of this or that investment or pension. But the latter plays an important part too and often will follow on from the planning stage.
When it comes to separation and divorce, there are probably three areas in which, in our experience, financial planners can really help: 1) answering the question “am I going to be ok financially?” 2) helping to decide what mix of assets you should seek, given options such as a pension share, cash, investments and/or the family home; and, of course, 3) advising on pension issues generally and pension sharing specifically.
Let’s look at those three areas in turn.
Separation and divorce can, of course, be a traumatic experience and part of the pain can be the uncertainty around the finances, particularly if you are not the one who has traditionally dealt with the finances. Even where there is significant wealth involved, to most people a lump sum pension share or an investment portfolio value expressed as a capital sum does not mean an awful lot when there are monthly bills to pay. The question that often comes up is “am I going to be ok financially?”.
Good financial planners are able to discern from you what your likely monthly and annual costs are, what lump sum costs you may have (to buy a new home, or help the kids on the property ladder, for example), and how much investment risk you may be comfortable with.
Armed with these and a few other facts, and some sensible and researched assumptions, we can translate the pension share or the investment portfolio value into an income for life to put minds at ease or, less comfortably, to show the reality of the new situation and work with you to address that.
In the next blog in this series, we take a look at which mix of assets might be the most suitable for you.
Richard Wadsworth is a Chartered Financial Planner at Carbon. Contact Richard via email on firstname.lastname@example.org or get in touch with your local office.
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