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Divorce and Pensions

At AFG, our solicitors offer solutions to the complex area of pension divisions available for clients going through a divorce or separation. We take a sensitive and efficient approach that aims to benefit both parties.

Pensions can now be included in any settlement or Court Order, so it is important to seek professional guidance to protect and secure your future.

Pensions are often one of the largest assets a divorcing couple has after their family home; they are also frequently one of the biggest worries for people going through the divorce process. Our divorce solicitors can take you through this complicated area of law and ensure you get the best possible outcome for your future.

Our experienced finance solicitors will help you gather information on your pensions and benefits such as death benefits, guarantees and other potentially complicating issues. Our specialist solicitors will advise on how to approach valuations for divorce purposes in both ‘needs’ and ‘sharing’ based cases and explain how the court is likely to deal with them.

What happens to my pension during a divorce?

Your pension funds will be treated as another asset during divorce or dissolution. The main aim with pensions in divorce after a long marriage is ensuring that the assets are split fairly between both parties and that both come away with similar benefits.

For example, if one party was a stay-at-home parent, they will have built up less of a pension than the other. This means that pension funds need to be split fairly with this fact in mind.

Pension Division in Divorce

There are several approaches to take with your pension during a divorce. Our solicitors are highly experienced in dealing with divorce and separation and pension rights, so we can easily advise you on the best route to take.

The main option when dealing with pension division during a divorce is pension sharing. The court can make an order that a certain percentage can be ‘shared’ from one pension to another, thus creating equality of pension income or capital.

Our pension sharing solicitors will help to identify the most effective option for you. Our team will secure your best interests whilst also offering a professional and constructive approach that will benefit both parties.

What are the options available for dealing with pensions in divorce?

Offsetting

Offsetting is how the law describes balancing the fact that one party will retain certain pension benefits when dividing up the other available assets between the parties on divorce. 

This might mean that one partner keeps their pension and, in return for it not being shared, the other partner might get a larger share in the family home. 

If a divorcing couple chose to deal with pensions in this way, the Court may consider it fair for the amount that would have been transferred under a pension sharing order to be subject to a reduction. This is to reflect the fact that the person receiving the higher proportion of the property or savings has received the benefit early and hasn’t had to wait until they reach retirement age.

This is one of the most popular options, but you have to make sure it is the right choice for you – £1 of capital or property may not necessarily be equivalent to £1 of pension. 

There would also have to be sufficient assets of the marriage, either in the value of the property or savings, to allow for this to happen. It can also mean that following the divorce one spouse may have kept their pension intact, but have very little “liquid” capital, and one spouse may have a much greater share of the liquid capital available.

Pension Sharing

Pension sharing is where an order is made that an agreed percentage of a pension should be transferred to the other spouse and the pension is therefore shared between the divorcing couple. 

This means that the pension is divided and a percentage of it is transferred to the other spouse who then holds that portion of the pension in their own name within a pension scheme. 

This can either be a separate pension within the same scheme as the originating pension or an external transfer to a different scheme. You will need to seek advice from an independent financial advisor to ensure you understand which is the best option. 

After the pension sharing order is finalised and effected by the pension provider, it allows each spouse the opportunity to continue to contribute to their respective pension funds.

Pension Attachment

When a pension attachment order is made, a portion of the pension lump sum/pension income/death in service payment is paid to the spouse directly by the pension provider. 

The main difference to a pension sharing order is that it applies to the value of a pension at the date of retirement not at the date of the divorce. This option is not used as frequently as the options listed above as the receiving spouse will lose benefits on remarriage.

It doesn’t achieve the clean break that many divorcing couples want to have and there is less certainty for the spouse receiving a portion of the pension as they have to wait for their former spouse to retire and receive their pension.

How does the Family Court look at pensions?

Any pensions belonging to either of the divorcing couple will be taken into account by the court when considering the assets of the marriage. This includes pensions that were already in existence at the date of the marriage, contributions made during the course of the marriage and pensions that were contributed to after the relationship broke down. 

It can include personal pensions, work pensions and additional state pensions. How much of the pension will be included can be a complicated question; the court initially looks at the total amount of any pensions, but in certain circumstances this can be departed from:

  • Your individual circumstances and relevant factors;
  • The needs of the other spouse;
  • Length of the marriage;
  • Length of time the divorcing couple have been paying into their pension schemes;
  • How much of the pension has been accrued since the marriage broke down;
  • How much was accrued prior to the marriage;
  • Whether the divorcing couple have similar pension investment amounts.

Pensions and divorce settlements

During a divorce settlement, all of the pension funds built up by both parties will be considered. After a long marriage, the aim is typically for a 50/50 split, but a fair result is always required. 

It is hard to ‘protect’ your pension during a divorce – it is unlikely that you would be able to withhold any funds as no matter who was the sole or main earner, you are both entitled to a fair share of the combined pensions. 

You might, however, be able to agree that your pension is offset against some other asset if you particularly wish to keep the pension intact and your spouse is happy for a larger share of the available capital.

If there are significantly unequal pensions within a divorce settlement, other assets may be used to compensate the spouse that might lose out. 

What is a pension classed as in a divorce?

In a divorce, pensions are classed as an asset just like your house and goods would be. Both yours and your ex-partners pensions will be considered when your divorce financial settlement is created.

How is the value of a pension worked out during a divorce?

One of the first steps our divorce and finance solicitors will take is to obtain the Cash Equivalent Transfer Value (CETV) of each pension held – this is because it can take some time for the different pension schemes to provide a CETV and we try to avoid any delays. 

Our divorce solicitors will discuss with you whether the CETV is a suitable valuation of the pension benefits and, in some cases, you may be advised to instruct a pensions actuary to prepare an expert report on the value of the pension.

Pension and Divorce Solicitors in Bolton and Bury

Consult an AFG lawyer about pension sharing and we will advise you on the best course of action. Our service of dividing up marital assets has been designed to make the process as straightforward as possible, ensuring that pensions and other assets are divided in a fair manner.

The family law solicitors at AFG can offer advice on all areas of family law. If you would like a solicitor to help you deal with your pension during a divorce, please contact us at our Bolton office on 0845 074 3491, or email us at paralegal@afglaw.co.uk.

Our expert team will provide you with more information on how effective legal representation will help to achieve a successful result.

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