Divorce: How are Pensions Dealt With on Divorce?

Divorce:  How are Pensions Dealt With on Divorce?


We have a highly experienced family team able to provide specialist and tailored legal advice for your needs.

When looking at resolving the family finances on divorce, Parliament provided a list of the areas which have to be looked at and considered whether that be in negotiations between the parties, at mediation, or by Order of the court. This includes:

  • “in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring”

The most common asset which one party may “lose the chance of acquiring”, is that of the other spouse’s pension fund.  Although the pension may have been paid into, either by the pension member and/or their employer potentially the whole of the pension fund can be considered on division of the assets.

Although retirement may seem sometime off, it is important that the right advice is received now. There really is only one chance to “get this right”.

During negotiations both parties will need to provide up-to-date valuations of their respective pension funds. These are known as CEV’s and can take many months to be received from pension providers. We would ask that you request these as soon as possible.

The pension’s can then broadly be dealt with in one of three ways:

  1. Pension share. A pension share occurs when one party’s pension is divided between both spouses. The pension being shared will have a “pension debit” whilst the spouse receiving the pension, will have a “pension credit”, to invest in their own pension fund. The amount of the pension share (which is always dealt with as a percentage) can be calculated in two different ways:

  • to provide the parties with equal CEV’s (pension pots);

  • to provide the parties with equal income on retirement.

  1. Pension attachment order. This would order a pension scheme provider to pay some or all of a members’ pension to their ex-spouse when they retire and begin to draw the benefits. This can be as a lump sum or as regular payments.

 

  1. Offsetting/Compensation for loss of pension rights. This would occur when the non-pension member forgoes any claim on the pension but takes more of the currently available non-pension assets instead. A pension attachment order requires a pension scheme provider to pay some or all a members’ pension to their ex-spouse when they retire and begin to draw the benefits. This can be as a lump sum or as regular payments.

By their very nature, pensions on divorce, require specialist advise and can only be divided on a court order (which is why they are not available to co-habiting couples). It is extremely important that, whether you are the pension member or the non- member, you take expert advice to ensure that you are as comfortable in your retirement as possible.

We have a team of specialist lawyers in the family department at Lawson West Solicitors who are more than happy to discuss your pension on divorce queries with you. Contact Us.