Pensions on Divorce

When a couple separates and embarks upon the divorce/dissolution and financial separation process the court has the power to redistribute the pension resources between the parties. Pension sharing can only be achieved within divorce or dissolution proceedings and by a Court Order, either by agreement or by order of a Judge.

Pensions can often form one of the largest, if not the largest, asset in a marriage. There can commonly be a disparity in values between a married couple, with one spouse holding a pension or pensions which collectively have a greater value than the other. It is important therefore to understand the options available.

Firstly, we need to understand the value of pension provisions and the income stream they will generate. A pension share as part of the divorce process could have a substantial impact upon a divorcing party’s ability to meet their needs into retirement. Assessment of the consequences of a pension share is imperative to understand what a pension share will mean at retirement age.

An option for the Court is to share pensions equally, especially where the parties have had a long relationship. Equality does not always mean a 50% capital share as this will not always provide both parties with an equal monthly income into retirement. To achieve equal income into retirement the parties will need to consider and take advice upon the appropriate pension share to provide for this type of equality.

Sometimes, separating couples will prefer to offset their right to a pension share. One party may wish to keep their pension intact and instead provide the other with another value asset in its place. Likewise, one party may prefer a settlement which provides them with a different asset to enable them to meet their immediate needs.

Although uncommon, the court can make a pension attachment order. This type of order provides for the pension provider to pay to a spouse a percentage of the pension income, lump sum and/or benefits to the other when the pension becomes payable.

It is part of our role of matrimonial financial lawyers to help and assist our clients in obtaining values for their and their spouses private, work place and state pensions. Once we have the factual matrix of fund information and values we then work with reputable actuaries to gather appropriate advice as to the best type of share for our clients and what that share would mean in terms of percentage and income. This allows our clients to make a fully informed decision when considering overall proposals for settlement.

Further Resources

At the University of Manchester, working with Advice Now and the Pension Advisory Group, we have created some free resources aimed at members of the public getting divorced including a video animation (three minutes) and Law for Life’s “A Survival Guide to Pensions on Divorce”. 

We want to help as many people as possible have access to the correct information about pensions when it comes to divorce or the end of a civil partnership. 

You can see the video animation here: https://youtu.be/VUh0Zuh1xbI 

 You can read the Survival Guide here: http://man.ac.uk/FhpI0W