Thinking about your pension when seeking a divorce
Willsons Solicitors have a highly experienced family department who have valuable knowledge regarding pensions within divorce proceedings.
When and how pensions are divided on divorce depends on the circumstances of you and your family. If your marriage has been short and both of you are in your twenties or thirties, then your pensions may not need to be divided formally at all, although their value may still be taken into account in other ways which is an important issue to take into account.
However, if you and your partner are in your 50’s, then pensions are likely to play a far more important or central part in your negotiations or the decision a court has to make.
It will be necessary to look at them within the overall context of your family finances and you will need to think about certain key questions:
What is the earliest date that you can actually take the pension (this can vary generally between big company final salary schemes and private pensions)?
When do you want to retire?
What capital sum or income will each of you be able to get from your existing pensions in retirement?
What expenditure do you think you will have when you retire?
Are there other savings or assets that can be used to meet your retirement needs?
The most important thing to do first is to find out exactly what pensions you and your spouse have. There are many different types of pension, and each of them has different rules and work in different ways, but the overall objective of a pension is to provide income and possibly a lump sum on retirement.
Pensions must be seen as part of the overall financial package.
Each of you needs an income in the short and long term, and each of you will need somewhere to live.
Sometimes it is possible for one person to keep more of the housing capital, instead of sharing a pension. Swapping all or some of your pension entitlement for other assets is often called “off-setting”.
Pensions can be divided between you both by a court order, through what is call a pension sharing order. There needs to be a final divorce (decree absolute) and a formal court order for a pension sharing order to take effect. However, that order can be one that is made by the court by agreement as part of a negotiated settlement.
If you are the person with the pension, a pension sharing order results in a percentage (not a specified amount of money) being transferred from your pension into a separate pension in the name of your spouse. Your spouse will then be entitled to the benefits of that pension completely independently of you. Those rights will not be affected, for example, by your death.
In most cases, the value that you receive as a result of the pension sharing order will be moved out of your former partner’s scheme and reinvested in your own new pension. The alternative, which applies more commonly with public sector schemes like the police, civil service and the NHS, is for you to have your own “ex-spouse” fund within the existing scheme, but you will still be able to draw on that independently.
It is important that you seek specialist legal advice regarding pensions on divorce, as so much depends not only on the type of pension involved and what it can generate in cash and regular income, but also on all the other facts of your case.
If you do require advice in relation to divorce issues, including pensions, please contact Lorraine Phimister, Heather Wolfe or Jessica Fletcher-Hall on 02476 387 821.