Pensions
How is a pension split in divorce? How much of my spouse's pension am I entitled to? How do I protect my pension in a divorce?
Blanchards Law is a niche family law practice with children’s law specialists at varying levels of expertise. We cover all areas of family finance in divorce and separation.
Can we help you? Please call us on 0333 344 6302 or contact us through our enquiry form. All initial enquiries are free and without obligation.
How is a pension split in divorce?
If you get divorced or dissolve a civil partnership, your pension assets should be taken into account in the settlement.
In divorce or the dissolution of a civil partnership, the pension can be the biggest asset, after the family home. You can distribute pensions in several ways, so it is important to understand the options before deciding what is best for you.
The total value of the pensions you have each built up are taken into account. This means all of your pensions, not just the ones you or your ex-partner built up while you were married or in a civil partnership. In some circumstances it may be possible to make adjustments to the financial settlement to reflect pensions accumulated outside the period of the marriage.
Divorce and pensions
Your pension should be included in your financial settlement if you divorce or dissolve your civil partnership. You should not remarry until you have reached a financial settlement.
Even when you agree on a settlement, it should be confirmed through a court order or consent order.
You can only share your pension if you are married or in a civil partnership.
Always get legal advice about your pension if you are divorcing or dissolving your civil partnership. This is particularly important if you are remarrying and have not agreed with your previous partner on a financial settlement.
If you have questions about your pension assets please give us a call on a free, no obligation basis, our specialist team will be happy to discuss these and our charging structure with you.
Please call us on 0845 658 6639 or contact us through our enquiry form. All initial enquiries are free and without obligation.
How courts deal with pensions
When a marriage or civil partnership ends, courts deal with the pension arrangements in one of three ways.
- You are given a percentage share of your former partner’s pension pot
This is known as pension sharing. The money that you get from the pension pot of your former spouse or civil partner is then transferred into your own pension pot, and is legally treated as your money.
- The value of a pension is balanced against other assets
This is known as pension offsetting. For example: you keep your pension and your former spouse or civil partner keeps the home or other assets with a similar value.
- Some of your pension is paid to your former partner
This is known as pension attachment or sometimes pension earmarking. This is like a maintenance payment directly from one person’s pension pot to their former spouse or civil partner. The money is not immediately yours, and you lose it if your former partner dies.
Under this arrangement, money from your tax-free lump sum can also go to your former spouse or civil partner.
Basic State Pension
Your basic State Pension cannot be shared if your marriage or civil partnership ends.
Additional State Pension
If you have an additional State Pension, the court could order that this is shared between you if your marriage or civil partnership ends. You lose these rights if you remarry or enter into another civil partnership.
While pensions do not need to be shared, they should not be ignored when deciding how assets should be allocated; pensions are often a couple’s most significant asset, after a house, and can easily be overlooked.
The value of your pension can be obtained from your pension scheme, however, you should be aware that there can be costs for providing this information and any subsequent court orders. These costs must be met by either one, or both, of the parties involved. The scheme administrator and/or pension provider must tell you about any costs at the beginning of the process.
If you live in England, Wales or Northern Ireland, your pension is valued at the date of divorce or dissolution of the civil partnership.
You Ask, Blanchards Answers: Some FAQs
We believe that the easiest and simplest route for most divorcing couples is the pension sharing order. A fair division is decided upon, then an order is sent from the court to the pension scheme mandating that a percentage is paid to the pension member’s former spouse. This can either be paid directly into an existing pension, or if the former spouse has no existing pension, this asset can be used to create one.
A pension sharing order can guarantee that both parties have an income in retirement, unlike pension offsetting (where one party gets an asset of equal value, such as a home). Yet at the same time, a pension sharing order allows the divorcing couple to have a clean break, unlike a pension attachment order.
The only time we would recommend using a different mechanism to divide a pension is when a pension sharing order is inapplicable or not cost effective. For example, if one partner has a foreign pension, then it is beyond the jurisdiction of British courts. In this case, pension offsetting would be the right solution. Or, if the couple divorcing is very young and the pension very small, it may be more cost effective to offset it than pursue a pension sharing order.
No. Pension sharing order or pension attachment orders can be achieved by consent and lodged at court without having to set foot in a court building. Pension offsetting doesn’t require a court order, and so can be accomplished via other routes, but again, you should always lodge a court order; a ‘Consent order’ to ensure all claims between you and your ex are dealt with finally by a judge.
The complexity of pension valuation is dependent on exactly what type of pension is under discussion. However, you can rest assured that we will enlist the expertise of accountants and other finance professionals whenever it is necessary.
As pensions are highly specialised financial products that are subject to regulation, and because they can have a variety of possible scheme rules and / or underlying assets held within them, we will always take advice when needed. Solicitors cannot advise on financial products or services. We can also work alongside your own financial advisors if you would like them to be involved in the process.
A pension actuary can play an important role in divorce proceedings, and are almost always brought in to advise when there are large or complex pension arrangements. Actuaries are often instructed by the divorcing couple to help decide on what percentage of the pension should be transferred to one party.
There are other scenarios where it’s generally recommended that professional advice is sought regarding the division of pensions. These include situations where there are pensions with public sector defined benefit schemes, where couples have a significant age gap, where low value pensions have guarantees which mean they generate benefits as if they were higher value, and where a total combined pension pot exceeds £100,000.
It might also be appropriate to seek expert advice when a case is based on separating out pre-matrimonial pension accrual and post-separation pension accrual. This is where one party is arguing that what has been acquired before or after the marriage should be excluded from division.
Rising interest rates can have a significant impact on the division of pensions in divorce proceedings. Over the last couple of years, the rise in interest rates has affected the value of cash equivalent transfer valuations. This, in turn, can affect the value of how much pension is transferred.
There will also be a delay between the date of a pension report and the making of the pension sharing order. In addition, pension trustees have three months to implement the pension sharing order. Inevitably therefore, the value of the pension can change. Interest rates can also have an effect.
Not usually. Once a pension sharing order has been implemented, it is quite difficult to undo it. However we at Blanchards Law are pension specialists and have been involved in two recent cases where we managed to reverse pension sharing orders after the funds had already been transferred.
Can we help you? Please call us on 0333 344 6302 or contact us through our enquiry form. All initial enquiries are free and without obligation.
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