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Help! My husband secretly gambled away his entire pension

I am a 62-year-old housewife. My husband of 40 years has recently finished up from work.

He has told me we will have to sell our house as he can no longer afford the mortgage and bills.

In response to this I asked him why, when he has worked for his company for 21 years and is due his pension, but he confessed that he has accessed the pension early and all the money is gone (gambler).

Later that week when he wasn’t at home, I searched his bedroom and found letters from the pension firm, but they were addressed to his mother‘s house.

Retirement savings gone: Married couples hold assets like pensions separately, but what happens if one partner gambles the money away?

This is the final straw for me and I am now going to pursue a divorce.

The home we own is valued at roughly £130,000 with roughly £35,000 outstanding balance on the mortgage.

I just want to know if he would have had to have my signature or permission to access his pension early, and even though the money is likely all gone would a judge award me half of a pension that no longer exists via a higher share of the equity in the house?

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Rhys Taylor is a barrister specialising in matrimonial finance claims who practises from chambers in Cardiff and London.

He is a co-author of Pensions on Divorce: A Practitioner’s Guide. He replies:

I am very sorry to hear about your situation and I am afraid that there are no particularly comforting words I can offer.

 

I will go through the issues your question raises, and your possible options below. 

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Rhys Taylor: It is likely that gambling away all retirement savings would be seen as being a ‘wanton dissipation’

How spouses hold assets in England and Wales

In England and Wales, unlike some other jurisdictions, married couples each hold their own assets separately.

Spouses are free to have joint assets, for example, a bank account, but unless they actively opt into joint assets, the starting point here is that each spouse owns their own assets.

Your husband’s pension was his own asset. 

You may have had some benefits as a spouse, for instance upon his death, but those would only kick in upon death and do not alter the primary fact that your husband’s pension was his own to do with as he pleases.

You did not need to sign anything before he accessed his pension early. 

Where might your husband’s financial adviser fit into this?

Your question rather implies that this was a company pension with your husband’s employment.

If it was a final salary pension, in order to cash it out as he has done, he would have had to obtain the advice and assistance of a financial adviser, as this is compulsory when such pensions are worth £30,000 or more.

He would have transferred his final salary pension, which after retirement would have paid him a guaranteed annual income for life, into a defined contribution pension pot.

If he had a company pension in a defined contribution scheme already, or transferred it into one, he would have had full and unfettered access to it from age 55.

However, he could have faced a tax bill if he withdrew more than the 25 per cent tax-free lump sum, as beyond that the money taken out plus his earnings would be subject to income tax.

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Asset split: Pensions are often worth more than houses (Stock image)

If he took out money before he was 55, the taxman would have levied a very heavy penalty.

The early cashing out of this pension appears to have been a very poor life decision on the part of your husband and it might be (I put it no higher than that) that your husband would have some recourse against the financial adviser for the quality of the advice he received (if he moved a final salary pension into a defined contribution pension).

The conduct of a financial adviser, if your husband had one, is something for him to take up rather than yourself, as you were not the client.

In any family financial proceedings upon divorce, I would expect a court would wish to be satisfied that your husband had explored any possible avenue of recourse. 

Are you allowed to rummage around in your husband’s paperwork?

You mention that you appear to have conducted a clandestine search of his paperwork.

The fact that he was having these documents sent to his mother’s rather suggests that he was seeking to keep these matters private from you.

It may come as a nasty surprise to you, but you are not entitled to access documents which your husband regards as private.

If you have taken a copy I would advise you to destroy it. If you have retained originals, these should be returned to him.

 

What will happen to your house?

You say that your house is worth £130,000 and that there is £35,000 outstanding on the mortgage.

You are 62 and do not say that you earn any money yourself and so I do not expect that you can pay off the mortgage via any income source of your own.

It seems to me that the house will probably have to be sold. 

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jpg” /> How should the equity in the house be shared between you?

There is £95,000 equity in the house.

After a long marriage a court will conventionally split the assets 50/50 and so you would each start with a notional expectation of £47,500.

As I have already stated, his pension was probably worth much more than your house, let alone ‘his share’ of the house.

The question of any court awarding you equity in the house to compensate for pension assets which have been squandered raises two different questions.

1) Trading pension assets for current assets

The first is how you would ordinarily go about trading the right to pension assets with current capital.

The trade-off is not on a like-for-like basis.

To access pension assets, after the conventional 25 per cent tax free sum has been drawn down, the recipient must pay income tax on their pension withdrawals and any other earnings, as explained above.

The court will be interested in the net value of the pension, after the tax has been taken off.

There is also often a debate about whether it is worth having cash now rather than pension assets later. However, events here appear to have overtaken that question.

I do not know what your husband’s pension was worth, but if he has worked for 40 years I would hazard a guess that his pension was worth more than your house, and possibly by some significant margin.

STEVE WEBB ANSWERS YOUR PENSION QUESTIONS #####IMG000000000#####
ladieswantmore.com/wp-content/plugins/OxaRss/images/e508b672940996dc3f9c90d3c2683894_11234760-0-image-a-7_1553096359129.

jpg” /> I kept my final salary pension, but my colleagues are taking pots worth hundr of thousands – did I make a big mistake? Does caring for parents aged in their 90s qualify me for extra state pension top-ups? Why has my late daughter ‘lost’ her DHL pension, which she paid into for nearly two years? If you move in with someone too ill to cope alone, do you risk losing your widow’s pension? If my pension fund keeps growing after I retire, can I have extra bites of the 25% tax-free lump sum? Can I avoid drawing a private pension so I can keep my pension credit? My husband worked 20 hours a week while on pension credit – could he get in trouble over it? I’ve been offered the chance to transfer INTO a final salary pension, should I take it? I want to cash in an old pension but still pay into the civil service scheme: Is this allowed? I want to take a 25% lump sum and leave the rest of my pension where it is – why am I being told no?        

He will be obliged to disclose what he had in any financial proceedings.

2) What will the court do about his conduct in gambling his pension capital?

In some limited circumstances the courts are prepared to take ‘gross and obvious’ financial misconduct into account, in deciding whether it should depart from a 50/50 split and ‘add back’ some or all that has been found to be ‘wantonly dissipated’.

The cases where the court has been prepared to do this are quite rare and one judge referred to the conduct needing to have a ‘gasp’ rather than merely a ‘gulp’ factor before it would be taken into account.

It is likely that gambling away all retirement savings would be seen as being a wanton dissipation with the requisite gasp factor.

But that is not the end of the matter, I am afraid.

The court, when exercising a discretion as to how to weigh the conduct, will take into account all the circumstances of the case, including the ne of both parties.

In a case where the assets are plentiful, there may be enough fat to conduct an ‘add back’ exercise and leave each party with an unequal amount, which will nevertheless be enough to rehouse them both.

However, in this case, I am afraid, there is very modest equity and you would be lucky to get a property for £95,000, subject to where you live in the country.

However, there will be retirement flats available to you which will be under £100,000 subject to where you are prepared to live.

It is most unlikely that £47,500 would enable you to move into privately owned accommodation.

To make matters worse, the holding of this level of capital may disentitle you to some state benefits if it is not used to purchase a home.

There has to be a real risk that the court would say that there is simply not enough money here to “add back” a sum of money which has been spent.

The court may well make some adjustment away from 50/50, to reflect what your husband has done, but it is likely that the court may award him something to get on with his life with and to help meet his ne. 

The exact outcome would be a matter for discretion for a judge who deals with this case.

If I were you I would be exploring whether you can rehouse yourself for £95,000 or less.

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If that is possible, you would be free to suggest that you have all of the capital (but this may be considered to be an optimistic outcome from your point of view) or that any capital due to your husband should be deferred in its payment to him, with you offering him a charge over your next property for what he may be entitled to in due course.

This would mean that he gets his money upon some future trigger event.

Traditionally such triggers would be your death or re-marriage.

The argument depriving him of capital either on an outright or deferred basis may have legs, if it appears that he is only likely to gamble away this share if he has capital paid to him now.

Double check your state pension position

You may want to double check your respective state pension positions.

You refer to yourself as a housewife and so I do not know whether you have a history of work which would have enabled you to accumulate a full National Insurance contribution history, to justify a full state pension.

If you had children or have been an unpaid carer, you might qualify for credits towards a state pension for certain periods, even if you haven’t worked.

Given your age, you will not be entitled to claim a state pension on your husband’s record, as this is only available to those who reached their state retirement age before 6 April 2016.

If your husband made additional contributions towards a second state pension in the past it may be possible to seek a pension sharing order against any ‘extra’ payments he receives in respect of that. 

How this might happen depends on whether he is in the old or new state pension and, whilst you give your age, you do not disclose his age, which would determine what state pension scheme applies to him, so I am unable to assist further in this regard.

  

What should you do now?

Your first step should be to find a solicitor who can help you sort through the matters I have explained above. I am sorry, once again, that there is little comfort for you here.

 

Please note that nothing I have said above is formal legal advice and it should not be relied upon as such. I can accept no responsibility for any acts or forbearance taken in light of this.

The information provided by our expert is illustrative and for the purposes of this article. Nothing in this response constitutes personal legal advice.

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