Exploring Alternatives for Pension Division in Divorce: Offsetting and Attachment

Generally speaking, a pension sharing order is the simplest and easiest way to make sure that pensions are shared fairly during a divorce. However, there are situations where pension sharing is not possible, such as with a state pension. In such cases, alternative methods like pension offsetting and pension attachment come into play.

Pension Offsetting: A Clean Break

Pension offsetting provides a clean break between two parties in a divorce, treating a pension as a single asset. Its value is offset against other assets of similar value. For instance, if one person has a substantial pension pot, the other might retain the house.

However, it’s important to note that offsetting can present challenges in some situations. Pensions differ from most assets in that their value may not be realised for many years, especially if the divorcing couple is not near retirement age. Furthermore, their value is likely to fluctuate over time. If a pension continues to grow, it could end up being far more valuable than the assets it was offset against.

Pension Attachment Orders: Retirement Provision For Both Parties

Pension attachment orders, also known as pension earmarking, represent another alternative. These orders redirect part or all of one party’s pension benefits to the other party when they’re paid. Unlike offsetting, attachment orders do not provide a clean break. Instead, they necessitate ongoing contact between the divorcing couple.

This is because the pension still belongs to its original holder, but some form of payment must be made to the ex-partner when benefits become payable. The court can order that the ex-partner receives one, or a combination, of the following benefits: all or part of the member’s pension income, all or part of the member’s tax-free cash lump sum, or all or part of any lump sum paid in the event of death.

Weighing the Pros and Cons

Both pension offsetting and pension attachment orders have their advantages and disadvantages. Offsetting allows for a clean break and simplicity, but one person might be left with little or no provision for retirement. Attachment orders enable both the tax-free cash and the pension income to be shared, but they can force couples who would rather not see each other anymore into protracted contact

If you’re not sure what the best way to deal with your pension is during a divorce, contact Blanchards. Our team of experienced family lawyers will be happy to discuss the specifics of your case with you personally.