What happens to pensions in a divorce?
A recent study funded by Nuffield has shown that despite around 80% of divorces having at least one pension amongst the assets in the case, only 14% of divorce cases have resulted in a pension sharing order being made as part of the settlement. Pensions can be one of the most significant assets in a marriage and should not be ignored.
The Pension Advisory Group have very recently provided guidance to assist legal professionals and the Courts which aims to ensure there is an accurate and fair division of pensions in divorces.
It is important that both parties provide as much information as possible in respect of all pension assets including state pensions. This can be done by completing the appropriate online forms or requesting the information direct from your pension providers and is commonly available free of charge.
There are various ways in which a pension can be treated in a divorce. The most common are pension sharing or offsetting. In most cases it is advisable that pensions are divided in such a way to either equalise the income or capital in order to achieve a fair division between the parties. This will be assessed on a case by case basis and is often done with the assistance of a report from a pension expert called an actuary.
Pensions are very complex. Consideration needs to be given to any difference in retirement age between the parties, whether any of the pension assets are in a public sector pension scheme, what benefits may be lost as a result of pension sharing, what fee the scheme will charge to implement a pension sharing order, and what tax implications there may be for the parties, amongst other. The role of a pension actuary is to provide an expert opinion that will assist you, your lawyers and the court in agreeing and deciding on how pension assets should be treated.
Ultimately the aim when dealing with the finances arising from a divorce is to strike fairness between you and your spouse and this is not limited to capital assets and income but also includes pensions. Our specialist divorce and finance team at Wolferstans are able to assist you with this. If you are going through a divorce and need advice in relation to resolving your financial settlement then please contact our New Client Co-ordinators.