What happens to my pension during a divorce?

When you are going through a Divorce there are so many aspects that need to be considered that your pension may not be at the forefront of your mind. It is important to consider your pension, however, for a variety of reasons. You and your spouse’s pension may be one of your most valuable assets, so you will both need to include any and all pensions when your assets are disclosed for the financial settlement. Additionally, you will want to make sure that the pensions are divided fairly. Here, we will address some common concerns about what happens to pensions during a divorce.

Each divorce is unique, so financial settlements vary from case to case. When determining how assets are divided, you may be able to avoid court hearings by agreeing with your ex-partner on how to divide your assets. Once you reach an agreement, you will need to apply to the court for what is called a “consent order” If you are unable to agree, you can request a financial order from the court.

In determining how to split a pension, the court will consider several factors. Because the goal is a fair and equitable settlement, the starting point for division of assets will be a 50-50 split. However, this arrangement will shift depending on the circumstances and the needs of each person. Some considerations include:

  • Whether you have dependent children and the arrangements being made for them, i.e. where they will live and how much time they will spend with each of you
  • Your respective assets, sources of income, and responsibilities.
  • The health and age of each partner.
  • The length of the marriage.
  • Contributions made to the marriage.

It’s important to note that monetary contributions are not the only ones considered. Looking after the home and caring for a family is considered to be of equal importance to being the breadwinner, so the primary earner is not necessarily entitled to a larger share of the marital assets.

How can I protect my pension during a divorce?

Because the goal of a financial settlement is an equitable division of assets, a pension cannot be hidden, nor its value excluded from discussions about the settlement. It may however be possible, provided the value of the other assets allow this, to negotiate an agreement whereby the value of other assets are divided unequally so that a division of your pension is not included in the final agreement

How do I calculate pension in divorce?

It is important that all pensions held are valued accurately. This could be as simple as checking your latest pension statement, but sometimes it is more complicated than that. If there are multiple pensions from different jobs that were previously held, they must all be included, and this is especially important if there are additional benefits attached like a guaranteed annuity rate. A final salary pension may have a value far greater than the transfer value that it is given. If the combined transfer values of the pensions you both hold exceeds £100,000 it may be important to consider having an actuary prepare a report on the implications of sharing the pensions. Your solicitor will help you to identify when this is necessary and who may be able to offer this service. Be careful not to forget about any old pensions as you must fully disclose your assets in your financial settlement, and you don't want to have to fight accusations later that you tried to conceal some of them. It's better to make sure you present everything in its entirety, rather than facing expensive legal action in the future.

How is pension sharing calculated in a divorce?

As stated previously, the financial settlement is determined based on the goal of achieving a fair and equitable division of assets. Pensions are shared in one of three ways:

  • Offsetting: In this scenario, the value of one spouse’s pension is offset against other assets from the marriage. This could mean, for instance, that the spouse without a pension gets to keep a larger share of the family home. This is not always feasible, since in some cases the pension is the single largest asset and there is nothing of similar significance to offset its value. When offsetting can be applied, however, and if the preferred outcome is not to have to share your pension, offsetting can provide the solution.
  • Attachment: Pension Attachment allows for the division of pension benefits once they become payable to the ex-spouse holding the pension. Each ex-partner agrees to receive a portion of the pension benefits, but not until the person with the pension receives their payment. This option is currently little used as a result of pension freedoms that came into effect in 2015 which may enable a pension holder to frustrate the Pension Attachment Order through taking out lump sums. This type of Order also does not allow for a clean break because the person holding the pension has control of it and can make decisions both about investment options and the date of drawdown of the pension. It also means that when the main pension holder dies, the pension ceases on their death and it ceases if the non-member spouse remarries.
  • Sharing: In this situation, the pension is split into two separate portions beginning once the party’s divorce has been finalised. Each ex-spouse has full control over his or her portion of the pension, and this allows them to retire whenever they want and be able to access the benefits as early as the age of 55. The reason most people choose pension sharing is because it offers the cleanest break, and pension independence.

Are pensions part of a divorce settlement?

Yes, pensions are certainly an important part of a divorce settlement, since they are often a valuable asset. People sometimes make the mistake of overlooking the pension when divorcing, but the court will take it into account in the financial settlement.

What happens to my pension during a divorce?

When you decide to divorce, you and your partner should agree on how to separate your financial assets. If your relationship is a marriage and you divorce, or if in a civil partnership and you dissolve the partnership, your partner may be entitled to some or all of your pension, depending on what the court decides. However, if you separate without legally divorcing, your pension won’t be shared, although your spouse may be entitled to the pension when you die. If you are cohabiting but not married or in a civil partnership, you might be able to nominate another dependant to receive your pension or nominate a beneficiary or beneficiaries for any lump-sum death benefit. It is therefore important that you consider the options available to you under your pension with your pension provider.

Can my ex-partner claim my pension years after divorce?

Because the process of divorcing simply ends the marriage without providing a financial settlement, an ex-spouse can make a claim on your finances at any time. This can be prevented, however, if you have a legally binding settlement. The best course of action, then, is to have a formal financial agreement in place to separate your finances and prevent issues in the future.

Get legal support for your divorce

Because pensions are complex financial structures it is essential that you take advice before making any decisions regarding these from both a trusted financial advisor and also your solicitor who can help you to consider the various aspects of the options that are available to you. Call our experts on 0330 912 1009 or fill out the free consultation form below.

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