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Pensions and Divorce

Why is a Pension an important part of a Divorce settlement?

A pension can be one the largest assets in a divorce, sometimes being found to be worth more than the family home. A pension can enable you to reach a settlement if used as a bargaining instrument.

But it is my husband's (or wife's) pension

During a divorce a pension no longer belongs to an individual. It is just another asset which has to go into the divorce pot for fair and equitable distribution. This can be voluntarily, through mediation, solicitors or the courts, it's important that you have good legal advice. The courts can have wide powers to apportion pension rights and this should be considered as an option when trying to come to an agreement.

Can my solicitor or the courts help me?

Your solicitor can guide you and call upon experts when he considers this to be necessary. Your first port of call should always be your family law solicitor but this does not mean that you should not do your homework as this can keep costs down.

Where do I start?

To begin, gather up all available documentation. If you are unable to get these your solicitor can request them from your spouse's solicitor and, in the last resort, the courts have the power to order that they should be divulged. We can also help you check on your eligibility for a state pension.

Pension offsetting, earmarking and sharing

From 1 December 2000, the courts gained wider powers to deal with pension rights. This was good news particularly for those who didn't have a proper pension of their own.

Pension Offsetting

Before this new law in December 2000, pensions were dealt with by offsetting and earmarking. Offsetting simply means that one partner's pension is traded against other assets from the marriage to give each other a fair value.

Pension Earmarking

Divorcing couples have a range of options to deal with pension benefits, including pension earmarking. Although take-up is quite low, earmarking orders have an impact on financial planning for both the member and their ex-spouse.

Pension earmarking is a form of deferred maintenance (also known as pension attachment). It was introduced in respect of pension benefits on divorce by the Pensions Act 1995 and is now also available on dissolution of a civil partnership.

An earmarking order requires part of the members lump sum death benefits and or retirements benefits to be paid to the ex-spouse / partner.

Pension Sharing

The court can makes a sharing order which results in the pension member receiving a pension debit. The ex spouse would then receive a corresponding credit. The order is passed to the trustees of the pension fund and they then have four months to implement it. It may be possible to allow the credit to remain in the scheme and the ex spouse would therefore have a special class of membership in the scheme with similar rights to those who have left a company but deferred the benefits in the scheme. The trustees could also insist that the credit is transferred to the ex spouse's scheme or a stand alone scheme.