During divorce or the dissolution of a civil partnership, the court can redistribute pension benefits between the involved parties.
Pensions, are often the second largest asset after the family home and it is vital to understand the options available.
Sarah Whitelegge, senior associate in the Family Law Team at Myerson Solicitors, explains more:
Importance of pensions in divorce
Pension schemes vary widely in type, benefits, and contribution methods. Both parties must disclose their pension benefits fully as part of the financial disclosure process. This includes obtaining the cash equivalent value for all pensions involved.
Entitlement to pension assets
The question of whether a spouse is entitled to half of the pension upon divorce is frequently raised. In divorce or dissolution proceedings, achieving fairness is paramount. The total value of both parties’ pensions can be considered if required to meet needs regardless of the origin or timing of the pension assets. The court can
consider all available assets to ensure equitable outcomes for both parties.
The Pensions Advisory Group (PAG) aims to improves the practice of dealing with pensions on divorce and upgrade the fairness and consistency of outcomes. The second edition of A Guide to the Treatment of Pensions on Divorce was published in January 2024. The report provides guidance for family professionals to encourage
better understanding of the treatment of pensions on divorce.
How are pensions divided?
Dividing pensions solely based on their cash equivalent value may not provide a fair outcome due to the parties’ needs, ages, and the duration of the marriage. A percentage split is often considered more appropriate to ensure equal pension benefits upon retirement.
Methods of dividing pensions:
- Offsetting:
Offsetting involves balancing the value of pension assets against other assets held by the parties. This method allows one spouse to retain their pension rights while adjusting the distribution of non-pension assets, such as the family home. It is essential to seek early and appropriate advice in offsetting scenarios. - Pension Sharing:
Pension sharing involves a court order to divide an existing pension arrangement between the parties. Each party has a separate pension fund post-divorce, ensuring independent financial security. - Pension Attachment:
A pension attachment order directs a portion of pension income, lump sum, or death benefits to be paid to the other party when the pension becomes available. Pension attachment orders are less commonly used than pension sharing orders or offsetting.
In conclusion, pension sharing in divorce proceedings requires a nuanced approach that considers each case’s unique circumstances. By understanding and considering the various option available—offsetting, pension sharing, and attachment,—separating couples can work towards achieving a fair divorce financial settlement that meets both parties’ long-term needs.
Contact the Divorce Lawyers at Myerson Solicitors for more information regarding pensions and divorce.
