Written by Phil O'Connor

Independent Financial Adviser & Mediator at The Divorce IFA

Phil's area of expertise is ‘financial planning on divorce’. He is one of the few Chartered Financial Planners and Certified Financial Planners in the UK, as well as being a Resolution Accredited Independent Financial Adviser.

“My divorce is concluding soon and I am going to have a lump sum of money for the first time in my life. What is the best course of action to take and what options do I have?”

Generally speaking, divorce is not a nice prospect.

That being said, I find that – with encouragement – clients can start to view a divorce as a beginning rather than an end.

A new start gives you the opportunity to re-evaluate and establish new goals and new objectives; and these goals will often hinge around your financial position post settlement.

If you end up with capitalised maintenance or a pension share, you could well end up with quite a sizeable amount of capital, and although positive in some ways, it can be daunting to know what to do with the money.

And the answer to the question of ‘what to do with it’, isn’t a one-size-fits-all one – it’ll be dictacted by the size of the settlement and your own individual circumstances.

If you have children

It may be that you can put money away for further education, or you might even want to set up a trust to help your children get their first foot on the housing ladder in a few years time.

If you were interested in setting up a trust, the main question would revolve around what sort of trust you want to set up. The type of trust you set up will depend on the ultimate goal for the capital and how much control you would like to retain in the interim period.

If your children are older, or you don’t have any children

Then you may want to consider investing the capital in such a way that it can help boost your income between now and when you retire.

You might consider home improvements, or even just splashing out on that dream holiday that you perhaps never had the time for before.

The options for large amounts of capital post divorce can feel quite daunting and it is easy to become overwhelmed with choice. If you have never invested before then where would you even begin?

It is a chance to take stock and consider what is most important to you and what your hopes and dreams are for your future now that you are in control.

If you haven’t already done so, opening an Individual Savings Account (ISA) would be a good place to start.

Barring the ISAs that lock you in for a specific time period, investing in an ISA means that your money will be growing without committing you to anything in the here and now; and with the rules now relaxed on ISA withdrawals, you can take money out and put it back as often as you like as long as you don’t breach the £20,000 ceiling.

Retirement is always a consideration too as in my experience, clients going through divorce are often at an age where retirement planning is a key consideration.

There are rules around what you can do with regards to making a pension contribution with a lump sum that relate to your earnings and again, this can be an area where many people feel a little confused with how to actually implement a pension contribution or start a new plan.

The bottom line is this: you have an opportunity to perhaps ask yourself questions that you never really had the time or facility to ask.

With a little help, you might find that your goals are closer than you once thought.


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    Are you stuck with knowing what to do with a lump sum?

    Everyone's situation is different as Phil has suggested - talking to an expert in the first instance can help clarify what your options are....

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