When it comes to divorce, pensions are just one of the many financial assets that need to be considered.
Pension funds often hold significant value in a divorce settlement, making it crucial to understand how they are viewed during the divorce process. The first step is to obtain a pension valuation, a key piece of information that will prepare you for the discussions on equalising pension pots.
Several factors can influence what constitutes a fair figure for equalisation. For example, we can advise you on whether pre-marital contributions will affect the division. Additionally, your and your spouse’s ages and any health conditions may warrant adjustments.
Achieving equalisation may involve one spouse transferring a portion of their pension funds to the other. There are three methods for dividing pensions upon divorce, each having its own implication.
Pension sharing
The most common method of dividing retirement assets is through a pension-sharing order. In this process, a portion of one party’s pension, known as a pension credit, is transferred to the other party. This transfer must occur through an existing pension fund or a newly established pension plan specifically for this purpose. The court, based on the circumstances of the case, determines what constitutes a fair percentage split between the parties.
Pension attachment
Sometimes referred to as “earmarking,” a pension attachment order designates a specific amount of a pension pot to be paid to the other spouse when the pension benefits are disbursed at retirement. However, this method is riskier than pension sharing and is rarely used. For instance, the other party would receive nothing if the pension holder died before retirement.
Pension offsetting
If a pension sharing or attachment order does not appeal to you, we can explore the option of pension offsetting. In this arrangement, each party retains their pension funds, but the spouse with the lower or no pension receives an additional asset instead. This often forms a larger equity share in the family home or a lump sum payment.
Is my ex-partner entitled to a share of my pension?
The decision to divide a pension fund depends on the specific circumstances of each case. Generally, most pension funds are considered matrimonial assets and will be included in the division of property. However, there are certain situations where a court may determine that a pension should not be divided. These situations typically fall into one of the following categories:
- the marriage has been a short one, and it is not equitable to divide the pension fund;
- the pension fund is tiny, and the cost of dividing it would not be worthwhile;
- the pension fund has been accumulated following separation or
- the pension fund was accumulated before marriage.
If you have separated from your spouse but have not yet obtained a consent order or a court order formalising your financial settlement, your former spouse can still make a claim on your UK pension. When pension funds are held overseas, your spouse is entitled to a share of it as long as it is considered a matrimonial asset. If you have an overseas pension, it is advisable to contact one of our specialist lawyers as soon as possible. The courts may not have the same powers regarding overseas pensions, and your options for dividing them will vary.
Are all pensions taken into account in a divorce?
Your former spouse may have a claim to your private pension, but they are not entitled to your basic UK state pension. However, your additional state pension can be shared.
If you or your spouse have a private pension, it must be disclosed during the financial disclosure process in the divorce. All pensions, whether located in the UK or abroad, need to be reported.
How can Harrington Family Law help?
We have a team of expert family solicitors experienced in representing and advising clients on all aspects of pension division and protection in divorce financial settlements. If you are outside the West Yorkshire area, we offer high-speed videoconferencing facilities to accommodate your needs.
If you have initiated divorce proceedings or are planning to do so, a good starting point is to gather complete and up-to-date valuations of all pensions you and your partner hold. The government offers a free forecast of state pensions, and the cash equivalent value of private pension schemes can be obtained by submitting ‘Form P’ through the court service website to your provider. We can assist you in this process and ensure you have all the necessary information for your case.