Pensions On Divorce
Have you considered your pension if you are going through a divorce?
If you are going through a divorce you must consider the matter of pensions alongside you finances. The Court can consider the value of the fund and off-set this against other assets or they can share a pension under a Pension Sharing Order. The Court has the power to transfer the entire pension fund or a percentage of it to the non-owning spouse.
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First Steps to Take
Most divorcing couples find it difficult thinking about pensions as they are considered too complicated to sort out. The best way to tackle pensions and divorce is to:
- Start by compiling a list of all the different pensions you both currently hold.
- Contact the pension providers to seek a valuation of the pension fund. Most pensions administrators produce annual information about the pension so give this information to your solicitor. There are lots of ways to value pensions, the valuation required by the family court is the “Cash Equivalent Transfer Value” or CETV.
- Your options then need to be explored to achieve the best financial settlement. Often a specialist Pension Actuary Report will be required.
- If you reach agreement that either your or your spouse’s pension/s will be shared then a divorce court will need to make a financial court order and a pension sharing order.
The value of any pensions can be offset against other assets you may possess. For example, you may want to retain the family home in return for your spouse keeping their pension.
When considering pensions offsetting, it is essential that pensions are accurately valued and the financial settlement is tested to ensure it meets short- and long-term needs.
If a pension sharing order is made, you will receive a percentage share of your spouse’s pension’s. This share then becomes your pension for the future.
If you’re thinking about your pension, but would like some more guidance about this and other options available to you, our team is here to help.
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What are my pensions rights in a divorce?
To start with, all the assets in the marriage have to be taken into account so that includes pensions. They often get overlooked so it's important to remember them. Pensions need to be shared along with all the other assets in the marriage. The starting point for everything is 50/50, although that's not always the final outcome. The aim is to achieve a fair settlement of everything and with pensions the aim is to meet your needs on retirement. so generally, you're looking at trying to generate similar retirement income for both of you. Sometimes we might need to ask a pension expert to look into the pensions, just to check how they're valued and to get an idea of what kind of income they're going to generate on retirement. If you have all the pensions or most of the pensions, you are going to be able to keep some of them because you need them to meet your income needs on retirement. If you're the person without the pensions or with the smaller pensions you're likely to get a share of the other party's pensions. Those shares can be dealt with in a number of different ways. They can be shared between you under what we call a pension sharing order, which means that the percentage of the bigger pension is shared into a pension fund for the person with the smaller pensions, it can only be used for pensions so you can't use that kind of order to generate cash from pensions. You want to do that. You need to look at offsetting your pensions against other assets. For example, you might want a larger share from the house and you might forego your claim on the pension or take a smaller percentage of the pension, there's one third option that can be used if appropriate. It's known as a pension attachment order. It means that the person with a smaller pension gets a share of the other person's pensions but not until they actually retire. Most people prefer to sort things out there and then rather than wait for the other person's retirement.
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Jessica is an Associate Solicitor and has specialised in family law throughout her career