Trying to navigate through the emotional strain of divorce and separation can already be very challenging, and in addition to this there is the pressure of how to fairly divide the finances, including some complex elements such as pension funds.
A pension fund is not as straightforward to value or then subsequently divide, in comparison to other assets such as savings. There are different types of pension funds, some of which can hold a hidden value.
In cases where there is more than one pension fund between the parties, and the totality of the pension’s funds is of high value, it is likely that the involvement of a pension expert will be required to ensure there is a fair split of the funds available between the parties.
A pension expert would be asked to prepare a report and within this report they would calculate what pension share may be required in one party’s favour to enable a fair split of the funds.
The only way to share a pension fund with another is by way of a pension sharing order, which is issued by the court.
What is a pension sharing order?
A pension sharing order, is an order made by the court and is binding on both the pension holder and the pension scheme. This order allocates a percentage of one party’s pension to another party, as part of settlement. Once the pension share has been implemented, each party would manage their own pension funds independently of one another.
How pension sharing works
The first step is to obtain the cash equivalent value of all pension funds; each pension provider will provide this upon request. Once these values have been obtained then consideration can be given by your chosen lawyer to the instruction of a pension expert.
As indicated above, a pension expert can look at the parties’ pension funds in far greater detail. They are able to ascertain if the cash equivalent value is representative of the true value of the fund, and what, if any, pension share may be required to achieve a particular outcome, such as the equalisation of the value of the parties’ pension funds.
If the parties agree that there is to be a pension share, or the court orders that there is to be a pension share, a pension sharing order will need to form part of the financial order, alongside additional documentation that will in due course, once approved and sealed, be sent to the pension provider to implement.
What are the benefits of pension sharing orders?
A pension sharing order is the only way that a pension can be shared. Some separating couples may try to offset a potential pension share with other assets between them, but any offset should be carefully considered and approached with caution.
A pension share separates the pension funds from the parties’ other assets and therefore reduces the issues in dispute. A pension is about meeting needs into retirement, and dependent upon the parties ages, should be treated separately so that the attention can be turned to the division of the other assets to enable the parties to meet their daily needs, including housing need.
If you are going through divorce or separation, and pensions form part of the assets between you then you should seek advice from an experienced family law solicitors with specialist knowledge of divorce and pensions. They will be able to advise you on your options and provide advice tailored to your unique circumstances contact our team of experienced divorce solicitors at Consilia Legal.
You can call us on 0113 322 9222 or email enquiries@consilialegal.co.uk to arrange a free 15 minute consultation.