Pensions On Divorce
What are pension orders?
Pension orders are a type of financial remedy order made on divorce or dissolution. There are three options for dealing with pensions on divorce. Each option has advantages and disadvantages.
Pension sharing orders
- With a pension sharing order the court can order one or more pensions owned by one party to the marriage to be divided between both parties.
- A pension sharing order is expressed as a percentage. E.g. a 100% pension sharing order would result in all of a pension being transferred.
- A pension sharing order can be internal or external. With an internal transfer the recipient becomes a member of the same pension scheme. With an external transfer the recipient must invest the funds in a separate pension scheme.
- A pension sharing order can only take effect on the making of a financial order.
- Offsetting is not a form of pension order. It is a way of taking into account the pension benefits by offsetting the value against the value of other assets, so that the pension is left intact for the member.
- There is no set formula for determining the value of the pension benefits to be offset because they are not directly comparable with other capital assets.
- Offsetting is often used where one party wishes to retain the matrimonial home and there are insufficient assets to "buyout" the others share without offsetting the pension.
Pension attachment order
- Pension attachment orders are maintenance or lump sum orders payable by the pension provider to the recipient.
- A pension member can be ordered to nominate their ex-spouse to receive some of all of the death-in-service benefits and to take a lump sum on retirement.
- As a pension attachment order is a type of maintenance order, payments will cease upon death, resulting in the recipient losing their income.
- A pension attachment order results in the pension remaining in the member's name. Therefore tax on the income from the pension is payable by the member and not the recipient.
How we can help
Pensions on divorce can be complex. We can help you:
- Determine the extent to which pension rights earned prior to marriage and following separation should be taken into account or excluded.
- Calculate the pension share required to achieve equality of income from a pension share, as opposed to an equal division of the pension funds.
- Decide which pension remedy is the most suitable in your case e.g. pension sharing, pension attachment or offsetting.
- Identify when it is appropriate to seek an expert valuation of the pension rights, for example where the pension valuation is not a true reflection of the value of the pension benefits.
- Negotiate a settlement through direct negotiations, mediation or court proceedings to ensure you achieve a fair outcome.
- Draw up an appropriate agreement or court order to record the terms of the settlement and to deal with the implementation of the pension order.
Need further advice?
If you need more detailed advice about pensions on divorce call us or apply online for a free case assessment.