Divorce Law and Settlements

Pension attachment order

A pension attachment order (also known as an earmarking order) redirects all or part of an individual’s pension to their ex-partner at the time the pension comes into payment.

The court can order that the ex-partner receives one (or a combination) of the following benefits:

• All or part of the pension member’s tax-free lump sum.
• All or part of the pension member’s monthly income.
• All or part of any lump sum which is paid upon the death of the pension member.

It’s important to note that the person whose favour in which the order was made will only receive the pension income when the pension member is of the age where they are in receipt of their pension. This type of order would also usually end on the pension member’s death or the remarriage of the receiving partner.

Pension sharing order

A pension sharing order tells the pension provider to transfer a percentage of the pension to whichever spouse is to benefit from the order.

While the pension share can sometimes remain with the same pension provider and be put into the receiving spouse’s name, more often it’s transferred into a different scheme.

Depending on the value of the pensions, it would usually be advisable to seek expert advice on how to best share the pensions upon divorce. It’s common for a pension expert (or pension actuary) to be instructed to calculate how the pensions will be shared to equalise income or capital value in retirement. The expert can be asked to provide additional calculations so that (for example) only pension built up during the marriage is considered.

Offsetting

In many divorces, it’s common for an agreement to be reached which involves offsetting.

This enables you to ‘trade’ your right to receive a pension benefit or give away your pension benefits. For example, one spouse may retain more equity in the family home and forego a pension sharing order.

The problem with offsetting is that it’s difficult to compare the value of a pension with the value of an asset. Therefore, it’s always best to obtain specialist advice from a divorce or pension expert.

A financial consent order details the terms of the agreement that you have reached with your spouse.

You both need to decide how you will share the matrimonial assets including capital assets, liabilities, pensions and income. 

If you and your spouse can reach an agreement in relation to your finances, this can be drawn up into a financial consent order by a solicitor and lodged at court with a £50 fee for the consideration and approval of the judge.

After this has been paid, the order is legally binding.

If discussions with your spouse fail, there are a variety of ways to resolve financial issues upon divorce.

You could instruct a solicitor to negotiate on your behalf, try mediation, collaborative law or arbitration or issue financial remedy proceedings at court. 

If a consensual agreement cannot be reached using any one of these processes, the court can impose a financial order at the conclusion of financial remedy proceedings.

We understand that it takes ambition, dedication and skill to establish and maintain a successful business. The impact of an unforeseen divorce on the business — both personally and financially — can be devastating.

The aim of any financial settlement (whether decided by the court or negotiated outside of court) is to fairly divide the divorcing couple’s assets. All assets owned by the couple will be disclosed and their values ascertained. Where a business is involved, independent accountancy input may be required to confirm the value of the business or an individual’s shareholding.

This doesn’t mean that a business owned solely by one of the parties must be sold, or that the company itself must be divided up in some way. Often, the appropriate result will leave the business with the owner, while other assets will be given to or be retained by the other spouse, such as cash, property or pension.

We know that business owners need urgent and strategic advice on how to preserve their asset, avoid damaging its value and preserve the income stream.

Ultimately, you need to know that someone is on your side.

The common themes and issues that we see arising are around how the business is valued, the different classes of shares and the issue of a minority discount, as well as how the court treats a business when it’s seen as an income stream rather than a capital asset (or if it’s both).

Other key issues arise where shareholders are concerned. This gets particularly thorny when it comes to how a business and its inherent risk and illiquidity is compared to other assets, such as cash or equity in a house.

For peace of mind and strategic advice, talk to our award-winning family law team. We will guide you through all the considerations and options to achieve the best possible outcome.

There are many options in terms of how jointly owned businesses are dealt with when divorcing.

It may be most practical for one spouse to transfer all their shares to the other as part of the financial settlement. In return for the transfer of shares, they may receive cash or other assets.

Sometimes a spouse may retain some shares, even if it’s agreed that they will not be involved in the day-to-day running of the business going forward. However, in such circumstances, the parties should consider entering into a shareholders’ agreement to regulate the business relationship and govern the way in which the business is run.

There may also be occasions where shares can be sold to third parties, although this will depend on the nature of the business and how appropriate a sale is. There may also be some circumstances in which it’s felt that a business should be dissolved.