Pensions on Divorce
Posted on October 18th 2019
It is common for people going through a divorce to have questions about their pension, for example, how their pension might be dealt with and whether they might have to give some pension away to their spouse. This article covers some key questions about pensions on divorce.
How are pension claims approached in divorce cases?
If you are going through a divorce, you will need to approach your pension provider(s) and ask them to supply the value of your pension(s), known as the ‘cash equivalent value’.
A solicitor can assist you by taking an initial assessment of all the assets in your marriage – pensions and otherwise. Your solicitor may then advise you to instruct a pensions on divorce expert, to provide further context. Many different questions can be asked of such experts with regard to how pensions might be divided between spouses.
If a pensions on divorce expert is approached, normally, the spouses will jointly instruct them. A letter would be prepared between them and their solicitors, setting out the questions to be asked. Once that report has come in, a couple and their solicitors will be in a position to properly assess potential pension claims, set alongside the wider picture of other assets in the marriage.
What might happen to my pension on divorce?
If you are going through a divorce, you and your spouse will have claims to each other’s income, capital and pension.
It is possible to divide pension assets between spouses on a divorce. There are two ways in which this can be done:
A Pension Attachment Order
Here, the pension provider of one spouse, will be obliged to pay a certain percentage of the monthly pension payment and/or cash lump sum that would pay out on retirement, to the other spouse. It is, essentially, a maintenance order.
A Pension Sharing Order
Here, a percentage of the capital value of a spouse’s pension is taken from one pension pot and then placed into a pension pot for the other spouse. This then means that each spouse has their own separate pension pot, which would pay out at the appropriate point in the future, in accordance with the Scheme Rules. In a sense, one pension is split into two pensions.
Can I ring-fence claims to my pension?
If you are going through a divorce, the entirety of each spouse’s pension assets will initially form part of the financial pot for discussion and division. On the face of it, it does not matter when these pension assets were acquired, even if they were acquired years before the couple met, or since separation.
Having said this, sometimes it is possible to ring-fence pension claims. It can be argued or agreed that only pension assets acquired within a certain time period be taken into account when dividing up the pension assets, rather than the entire pension pot. For example, some people may argue or agree that any pension assets acquired before they got married should be disregarded.
Although ring-fencing is technically possible, whether or not it might be appropriate or successfully argued would depend upon the circumstances.
Can I off-set a claim to my pension against a capital asset like a house?
Sometimes people prefer to see if they can keep more of their pension assets, in return for offering more capital assets (often money in a house) as a pay-off for this. This is known as off-setting.
It is possible to agree to an off-set between capital assets and pension assets. However, this is a very complicated process.
Further advice should be sought from a pensions on divorce expert before looking seriously at off-setting pensions.
If you would like advice about Pensions on Divorce, or anything else in relation to family law, please contact us on 01244 312306.
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