The vast majority of us have a pension and for some it can be our most valuable asset. Research shows that people find the topic of pensions to be complicated and, it is therefore not surprising that following the breakdown of a relationship the importance of dealing with pensions can sometimes be overlooked.
When considering what is an appropriate financial settlement upon divorce or dissolution of a civil partnership the court can consider all “financial resources” that are available to both parties. This may include property, cash in bank accounts, investments, shares, businesses, pensions and income. The court will also take into account liabilities such as loans and credit cards.
In seeking to achieve a fair outcome upon divorce or dissolution, the court has the ability to make the following orders in connection with pensions:
- Pension sharing orders – This will set out what percentage of a pension should be transferred to a spouse or civil partner as part of a divorce or dissolution to achieve a clean break.
- Pension attachment orders – In these circumstances, either part of all of a member’s pension benefits are redirected to their former spouse or civil partner at the time the pension comes into payment on retirement.
The most common form of pension order made by the court is a pension sharing order. It is also common for there to be an “offset” where one person will retain their pension and to achieve a fair outcome the other party will retain more of the non-pension assets.
How does the court determine what percentage, if any, of a pension should be shared?
The starting point will be full disclosure, whereby both parties provide full details of all pensions in their name including the pension’s cash equivalent transfer value (CETV) and details of any benefits under the scheme. Depending upon several factors including (but not limited to) the age of the parties, the value of the pensions and the type of pensions it is likely to be advisable to take specialist advice from a pension on divorce expert (PODE) or actuary. That expert can advise upon the pension share required in order to achieve equality of either the capital value of the pensions or equalisation of the benefits including the income that may be received from pension provision.
Following exchange of disclosure, if it is apparent that the parties have very similar levels of pensions in similar schemes, or very modest pensions and the couple are both fairly young then it may be appropriate for no pension order to be made. Each case is unique which is why it is important to take specialist advice.
Two pensions may look, on the face of it, as though they have a similar value, but the benefits received under a pension scheme can be very different and this may not be fully reflected in the CETV or pension valuation. For that reason, we often work with our client’s independent financial advisers (IFAs) so that we have good understanding of the nature of the scheme.
A family lawyer can help to ensure that if there is an order made in connection with your pension that it is fair and reasonable. Likewise, if you are getting divorced and are seeking a portion of your spouse or civil partner’s pension a family lawyer can help to ensure that you receive a fair share of your other half’s pension.
There is no doubt that dealing with pensions on divorce can be a complex issue, however a specialist family law solicitor can work with you to help to ensure that the issues of pensions is considered as part of any financial settlement.
