Pensions are one of the most often overlooked assets in divorce cases. It’s easy to see why. When there are such emotionally fraught issues as the family home or the care of children to consider, it can be difficult to put as much effort into pension negotiations.
Some younger couples make the mistake of putting little value on them, since they only offer a return in the long term. It can be difficult to invest much thought into something which will not significantly affect your life for many years. Others assume that their spouse’s pension will likely be of similar value to their own.
However, the outcome of pension sharing is vital to your future as a separated person. Without an accurate valuation of both pensions, it’s likely you won’t reach a truly fair settlement. The court may even refuse to finalise your court order if a pension has not been accurately disclosed as part of your finances. You may also regret it later down the line.
If your partner’s pension is significant enough that you should fairly be given an offset payment or receive a percentage of their pension fund to invest for your own retirement, it can make all the difference to your financial security. Unfortunately, life is unpredictable, so even if you’re planning to build up a healthy pension of your own, it can be a comfort knowing that there is something set by for your retirement if the unforeseen happens.
How are pensions split in divorce?
Any pensions should be considered as assets within your financial settlement. If you are agreeing on how to split your finances out of court, these should be considered in negotiations with your spouse.
When you know the value of a pension and it makes the split unfairly balanced in the favour of one party, one option is to have be a pension sharing order. This is when a percentage of the pension is officially shared with the other party. This can be done either by adding them to the existing pension scheme or setting up a new pension in their name and transferring the funds there. It is possible to still have a clean break divorce if you go down this route.
Another option may be to offset a pension sharing claim by receiving a greater share of other assets. For example, if you are selling the family home, the party without a share in the pension may get a larger percentage of the net sale proceeds. Doing this should not affect your ability to have a clean break divorce.
If you take the matter to court, another possible , but much less common, option is receiving an attachment order. This is when the recipient of the pension is required to send the other party a certain amount of their pension income once they begin receiving it.. Attachment Orders cannot be given if your spouse already has an Attachment Order from a previous marriage. They also remove the option of a completely clean break divorce.
It should be noted that the appropriate approach to dealing with pension claims can be slightly different if one or both of the parties are already retired.
So do I get half my husband/wife’s pension?
Your solicitor may speak to you about getting expert advice to establish what percentage pension share you would need to each receive equal retirement income. This may not be equal to 50% of the capital value of the pension fund. It is common to instruct a Pension on Divorce Expert (PODE) to make sure your finances are properly protected.
When considering your finances, the first priority is to meet the needs of any children. The second is to cover the current and future needs of both parties. Overall, your finances should be split as fairly as possible.
Without a Pension Sharing Order, you cannot receive a percentage of your partner’s pension. However, you can negotiate a lump sum payment to offset the role it would have played in meeting your current or future needs.
In the case of young couples who have only been married a short while, it may sometimes be appropriate for both parties to keep their own pensions, and your solicitor can discuss the best approach with you.
How do I value my pension plan?
To discover how much your pension is worth, you will need to find out its Cash Equivalent Value (or CEV). This will often appear on your annual statement.
If you don’t have one already, Most pension providers can provide you with the CEV of your pension on request. However, in the case of pensions based on factors such as final salaries, the CEV may not be very accurate, and your solicitor and a PODE can give you guidance on this.
Different types of pension – such as public sector pensions or defined contribution schemes – may also need to be treated differently when calculating your assets. Pensions will additionally change in value over time, so it can be a difficult landscape to manage on your own.
To help you to get accurate calculations for pension sharing or offsetting, many divorcing people find it useful to consult a PODE. These specialists can be jointly hired by both divorcing parties or on an individual basis. A family law solicitor can guide you through asking the right questions and preparing the necessary paperwork.
Can you Claim on a Pension After a Divorce?
A completed divorce does not automatically end your financial relationship with your spouse. Therefore, it is possible that an ex-partner can make a claim against your pension after your marriage with them has ended.
To avoid this, most solicitors advise turning your financial settlement into a legally binding court order. Once an order is approved by the court, neither party will be able to make a further claim on the other’s finances, including their pension.
How can a Solicitor help me with pension concerns during my divorce?
For full details on this, you can take a look at our post on Pensions on Divorce.
To be brief, a family solicitor can help you to understand your options when it comes to your pension and advise you on which route may be the most appropriate for you. They can consider the pension provision in detail and offer guidance as to when it would benefit you to consult a PODE. Gathering all the right paperwork to value your pension can take some time, but it can be faster when you know what to prepare beforehand and ask the right questions.
They may also be able to keep a look out for situations which could result in you being unable to get a fair outcome. For example, retirement-age parties sometimes start to receive money from their pension before it’s possible to make a court order.
Our financial settlement lawyers at Harbour Family Law can make the pension-splitting process as worry free as possible and help you reach the best possible outcome. Learn more about our services here or get started with us online.