Separation: how an IFA can help smooth the way

February 26, 2025

When a couple decide to separate, whether married or in a civil partnership, or having lived together with no formal, legal status, it can be a stressful and emotionally charged time. Whatever the circumstances, the financial implications of a separation often add to the strain.

Seeking the assistance of an Independent Financial Adviser (IFA), as early as possible in the process (potentially even before you have decided to leave a relationship) can be incredibly beneficial for both parties involved. 

Having a trusted IFA on board can help you to clarify your financial picture, navigate the separation of your finances, and set your mind at rest about your financial future.

Comprehensive financial assessment

One of the first steps an IFA can take is to perform a detailed financial assessment for both parties. This involves gathering information about all your joint assets, liabilities, income, and expenditure. This comprehensive review provides a clear picture of your financial situation, helping you to understand your current standing and highlighting what you need to consider for the future.

Dividing assets – investments, savings, property, pensions, and other financial assets – in a way that both people consider fair can be one of the most contentious aspects of a separation. Your IFA can help identify and value these assets accurately, and give you advice on how to divide them equitably.

If there is a significant imbalance in earning power (or financial knowledge) between you and your spouse/partner, an IFA can also act as an advocate for the more vulnerable party, ensuring that their financial interests are protected and that any agreements reached are fair and sustainable for both, and that children can be provided for.

Dividing pensions when you separate

With their significant long-term financial implications, pensions can be one of the highest priority assets in a separation. They can also be complex and challenging to divide. Your IFA can explain the different options available for pension division; such as pension sharing orders or pension offsetting. Their expertise helps you to make informed decisions about your retirement savings, and protect your financial future:

1. Valuation: Obtaining accurate valuations of all pension assets (including both state and private pensions) to ensure a fair assessment of the total value to be divided.
2. Offsetting: where one party retains their pension while the other receives a corresponding value in other assets, such as property or savings. This can be suitable if both parties agree and the assets are of equivalent value.
3. Pension Sharing Orders: these allow for pension funds to be formally split between both parties, ensuring that each party receives a fair share of the future retirement benefits.
4. Future Planning: re-evaluating your retirement plans and adjusting pension contributions accordingly. This includes updating beneficiaries and ensuring that your pension plans align with your new financial situation.

The advice provided by your IFA will complement, and often inform, the professional legal advice involved in your separation. 

Capital Gains Tax (CGT)

One potential financial pitfall that many people don’t realise they need to watch out for is CGT (capital gains tax).

Separation can have significant tax implications, including CGT liabilities on the transfer of assets, and future income tax due to changes in family dynamics. 

Your IFA can provide advice on how to manage and mitigate these tax implications, ensuring that both parties comply with tax regulations while minimising their tax liabilities.

Financial protections following separation

One aspect of joint finances which is often in danger of being overlooked when a couple separates is joint financial protection policies, such as life insurance or critical illness cover. It’s not unusual for this to come fairly low down on your list of financial priorities, but your IFA will ensure that you don’t forget to amend your financial protections as appropriate to your circumstances.

These policies can usually be maintained, amended, or cancelled, depending on the circumstances. But it’s essential to review the terms and conditions and consult an IFA to ensure that you’ll still end up with the appropriate level of cover to protect your financial interests after separation. 

Support and collaboration

While your IFA’s primary role is financial, their support can extend beyond mere numbers. They will offer you an objective perspective during potentially emotionally charged negotiations, helping you to focus on your long-term outcomes.

An IFA often works closely with legal professionals. Unlike solicitors, who can usually only work for one party, an IFA can often act as an expert, unbiased witness for both sides. They can review your financial information and prepare a report showing what a particular financial split would look like, and provide the necessary financial documentation and expertise required in legal proceedings, enabling you to make more informed decisions and making the process smoother and more efficient.

At Talis IFA, we take a ‘life first, money second’ approach, so our recommendations are based on developing a deep understanding of your current situation and future plans – whether that’s focused on your immediate future or ensuring your financial security later on.

Because we’re fully independent our advice is always completely objective and focused on what will work best for you.

To discuss your plans, find a Talis IFA here.