Dividing Matrimonial Assets and how Cash Flow Modelling can help you

By Gary O’Brien, Managing Director and Chartered Financial Planner at Ardent Financial Planning, a member of Legal Futures Associate, SIFA Professional

On the 15 November, Berwins Solicitors and Dere Street Barristers co-hosted the Northern Family Law Conference in York. It was an excellent, well attended event, and at its heart was Alternative Dispute Resolution. With the seemingly ever-increasing pressure on the Courts, the Conference focussed on some of the established, as well as some of the newer, ways in which separating couples can work with professionals to arrive at agreeable financial settlements, without having to revert to the Court system.

As a Resolution Accredited Independent Financial Adviser since 2007, I have considerable experience of helping couples and their solicitors to arrive at financial settlements, and the organisers of last week’s conference very kindly asked me to present at one of the break-out workshops.

As stated, the main purpose of the event was to encourage and increase the use of the various methods and professions available to help divorcing clients reach settlements which allow them to move forward independently and confidently with their lives. It was great to see that the attendees represented many disciplines from across the spectrum of the divorce process, including family lawyers, collaborative practitioners, mediators, barristers, a judge, family consultants, divorce coaches and financial advisers. All of whom have a shared goal of delivering the best possible outcomes for clients.

My workshop was focused on the use of Cash Flow Modelling to assist in the process of dividing matrimonial assets in ways which deliver optimal outcomes for both parties. I was delighted to find that I had a room full of delegates, which included many of the professionals mentioned above, including family lawyers, mediators and the judge.

I used an example case which was based on an actual couple who I had worked with a year ago. The husband had a combination of defined benefit and defined contribution pensions, whereas the wife’s pensions were all defined benefit. Both clients would qualify for maximum State pensions. The original brief had been to look at ways to balance out retirement benefits for the couple.

The husband’s pensions generated considerably higher income in retirement than the wife’s, so she would need to receive some kind of pension credit to even things up. None of the husband’s pensions allowed internal transfers (shadow membership), so the wife’s pension credit would need to be invested in a new arrangement for her.

Using our financial modelling software and presenting it on a large screen in the room (which is how I prefer to do it in actual cases), the first stage was to show the audience the current disparity between the parties’ income in retirement. One of the beauties of using the modelling software is that it uses very clear and simple charts to map out the clients’ financial future in a very understandable and easily assimilated way. The first 2 charts I presented (one showing the husband’s current situation, the other showing the wife’s) left no one in any doubt that a transfer of pension rights to the wife was necessary.

I then presented a scenario based on sharing the husband’s defined benefit pensions in order to equalise retirement income. Again, the charts make it very clear that based on the calculated pension share, the incomes had indeed been equalised at State pension age, and both parties now had a level of income in retirement which met their respective income needs.

Another big advantage of the software is that it allows you to present 2 charts at the same time, one above the other, so you can easily show the pros and cons between different scenarios for one party, or the difference between the 2 parties’ respective situations. The judge actually made a comment about how useful that feature was, and how much quicker and easier it makes it to assess different proposals.

The next scenario I explored with the audience was to equalise retirement income by sharing the husband’s defined contribution pensions, rather than the defined benefits. Again, using a pre-calculated pension share, the system clearly demonstrated that pension incomes had again been equalised in retirement. But by sharing the defined contribution schemes each party’s income was just over £2k p.a. higher. Therefore, we had created more value for both parties by being selective about which pensions were shared.

The final scenario I presented in the session took the above point a step further. One of the husband’s older defined contribution schemes had an underlying guaranteed annuity rate. So by excluding that from the pension share, and taking more from the other DC schemes, we were able to generate equalised income for both parties which was yet higher still (although not as significant an increase as in the previous model).

The session was really well received. Some of the participants were already engaging with cash flow modelling, but many were seeing it in action for the first time. Feedback received during and after the presentation suggested that the benefits were very clear. One person made the comment that the charts were a fantastic reality check for clients, and it was immediately obvious how changing a proposed settlement affected the financial position of both parties.

During the plenary session at the conference close there was considerable discussion around some of the newer emerging ADR approaches, such as Resolution Together. Several people in the audience expressed some concern about these approaches and wondered how looking after both sides could work in practice. Much of the cash flow modelling I get involved with is in a neutral capacity. i.e. I am looking after the interests of both parties equally. One of the attendees from my session spoke up at the plenary and made the comment that the financial neutral role was a good example of how both clients could be looked after with no conflict of interests.

The conference was a great day. It was so nice to be back in a group environment after all the restrictions of recent times. And it was also great to be sharing an event with several different professions all working towards a common objective. My sincerest thanks to Berwins and Dere Street for putting together such an enjoyable event.


Gary O’Brien is a Resolution Accredited Independent Financial Adviser, a Chartered Financial Planner, and the Managing Director of Ardent Financial Planning based in York.

This financial advisory company is listed on the SIFA Professional Directory of financial advisers (North Region) – to view their details please Click Here


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