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Divorce & Pensions

In this article Sarah Robson, one of our family law specialists, considers how pensions are treated in a divorce.

In most divorces pensions are one of the main assets of a marriage, usually second only to the family home. If you are facing a divorce it is vital to give proper consideration to the pensions in any financial settlement. It is important to note that a pound in a pension fund is not the same as a pound in cash or even property and is therefore treated differently in a divorce.

The starting point is to obtain the cash equivalent value of all of your pensions. This is done at the same time that you obtain valuations for all other assets and provide financial disclosure of all assets and liabilities. It can take time for the pension provider to calculate the figure so applying for it promptly is advisable. You will need to provide the valuations of all pensions, not just those that were accrued during the marriage. In some instances, it might be possible to make adjustments to the financial settlement to reflect pensions accrued outside the period of the marriage (and cohabitation). Your spouse will obtain the same figures for their own pension entitlement.

There are several options available to the court regarding pensions, but the main ones are:

• Pension sharing - an agreed percentage of one spouse's pension fund is transferred into a pension fund in the other spouse's name. There is generally a fee payable to the pension provider for implementing a pension sharing order. The advantage of this option is that a clean break can be achieved between the parties.
• Offsetting - with this option the value of any pension is offset against other assets. For example, one party might retain the family home in return for the other party keeping their pension. It is vital that pension expert advice is obtained, usually from an actuary, as this is not a straightforward exercise.
• Pension attachment order - some of your pension benefits are "earmarked" so that your exspouse receives some of the pension when it becomes payable. This can be income or capital lump sum.

The options available for dividing pensions are also applicable if one party has retired and their pension is in payment. All of the options available for dividing pensions require a court order in a divorce. If you and your spouse reach an agreement regarding the division of your assets, then you can apply to court for an order by consent. If an agreement cannot be reached, then either of you can apply to court for a financial order. For both options the cash equivalent value of your pension provision is required by the court.

Determining what happens to pensions in a divorce is a complex issue. As well as having legal advice if may be necessary to instruct a pension expert to prepare a report advising on the best way to share the pensions. This is particularly the case for final salary pensions, Local Government pensions and Army pensions, to name a few. You might also need to take independent financial advice.

For more information contact Sarah Robson in our Family/Divorce department via email or phone on 0333 207 1130. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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