One of the most difficult and contested matters to deal with on divorce is often the issue of pensions. As a family solicitor, I often get asked questions such as “is my wife entitled to half my pension if we divorce?” or “How do you split pensions in a divorce?”.
The issue of pensions on divorce is nothing new however it has been subject to analysis in the recently published, Pension Advisory Group Report (Second edition) (PAG2)* and the Fair Shares Report** both of which echo what us family law practitioners are acutely aware of, namely that pensions continue to be the main asset which is overlooked when a separating couple are splitting their assets on divorce.
In many cases, an individual going through a divorce may consider that their pension very much belongs to them. They may have been paying into it before the marriage and expect to continue to do so long after the relationship has ended. The idea of giving some of that pension away can seem unfair, unjustified and can lead to feelings of resentment.
Findings from the Fair Shares Report reported that the issue of pensions was particularly contested where a person took an individualistic approach to the marriage, keeping finances separate. There also continues to be a lack of understanding surrounding pensions and the impact they can have on a person’s financial future after divorce.
The legal position on pensions
As a consequence of general public perception on how pensions should be treated on divorce, there are still a high number of cases where pensions are simply ignored when it comes to splitting assets on divorce or where their true value is not properly understood. This can lead to unfair outcomes in many divorce cases and can cause financial difficulty in the future for those who fail to benefit from the sharing of pensions.
Put in simply terms, pensions are an asset which the Court has the power to distribute between the divorcing couple, primarily to meet their needs. Whilst there may be room for arguments to be put forward in relation to pre-marital or post separation accrual in big money cases, pensions are very much part of the ‘pot’ to be divided between a separating couple on divorce.
How to approach pensions on divorce
Not every case is the same and it is important to obtain independent legal advice about your own situation, however as a general rule it is important to take the following steps where either person to the marriage has a pension:
- Gather all of the pension information. Obtain an up-to-date Cash Equivalent Transfer Value (CETV) for all of your pension schemes by completing a Pension Enquiry Form (Form P) together with information for State Pension Entitlement from the DWP. This can sometimes take up to 3 months and so it is important to carry out this task as soon as possible;
- Consider whether to instruct a qualified financial adviser to assist you in understanding your pension funds;
- As part of the process of providing full and frank financial disclosure to your spouse on divorce, you will then exchange pension information so that you understand the full remit of both of your/the pensions;
- Evaluate whether to jointly instruct an independent Pension on Divorce Expert (PODE) to prepare a report on how to split the pensions;
- Before agreeing on how to deal with pensions on divorce it is important to take independent legal advice, if you have not already appointed a solicitor to advise you at this stage;
- Agree on how to split the pensions and whether that will be in the form of a pension sharing order, pension attachment order or possible offset payment from other capital in lieu of a pension share. Where there is going to be a pension sharing order, agree how the charges are going to be paid and into what scheme the receiving spouse’s share of the pension will be paid;
- Instruct your solicitor to prepare the Consent Order and accompanying paperwork to formalise the agreement as to pensions as part of any overall financial settlement that has been reached between you.
It is advisable to engage with a financial adviser from the outset of your matter so that they help you to understand your pension benefits and advise on any future retirement planning post divorce.
If you would like to arrange an initial free consultation with one of our specialist family solicitors, please call 0113 322 9222 or email us at email@example.com
This article is for information purposes only and it is imperative that you seek independent legal advice from a family solicitor in relation to pensions on divorce.