Pensions Within Divorce | Family Law

The division of marital assets can be a challenge at the best of times, but things may become a little more challenging when pensions are part of the equation.

Pensions can often be the largest asset within the marriage and are often dismissed as not being a matrimonial asset. However, it is important to be aware that pensions accrued during the marriage can often form part of the ‘matrimonial pot’ and could form part of your financial entitlement.

Your entitlement following a divorce

Where parties are married or within a civil partnership, you may be entitled to some or all of your spouse’s pension. It is, therefore, sensible at the outset of the divorce for both spouses to obtain full and frank financial disclosure from one another by individually completing a Form E. This is because, quite often, pensions can be significant in value, from which the court is likely to consider this should be shared with your spouse. Within the Form E, both parties are to provide details of their pensions and evidence of their valuations.

Once parties are in receipt of their spouse’s completed Form E and pension valuations, it is advisable to obtain independent legal advice before your marriage/civil partnership has been officially dissolved regarding your possible financial entitlement, especially with regards to the division of pensions. As your solicitor could possibly advise you on the following options: –

• Pension offsetting – this is where one party will keep the entirety of their pension, but this is on the proviso that the other party will retain a larger share of a different marital asset.
• Pension sharing – this is when a percentage of one party’s pension is ‘shared’ with the other party.
• Pension attachment – this is when a part or all a spouse’s pension benefits are transferred from one party to the other at the time the pension comes into payment.

Will I need to instruct a pension expert?

It may be necessary to instruct a pension expert known as an actuary to assess what would be a fair financial outcome for both parties.

The pension expert will review the necessary pensions held by both parties and review/advise on the following: –

• type of pension,
• the pension scheme rules,
• the differing retirement ages,
• benefits of pension sharing, and
• any tax implications.

A pension expert, at times, can be rather costly and, therefore, a matrimonial solicitor would be able to adequately advise you as to whether an expert should be instructed.

What about my state pension?

Whether your state pension will form part of the ‘marital pot’ will depend entirely on when you get to state pension age and whether you will get the new or old pension.

New state pension

If you reach State Pension Age after 6 April 2016, then you are more than likely to be in receipt of the ‘new state pension’ and this cannot be shared upon divorce or dissolution of a civil partnership. However, if you or your spouse receives the benefit of a ‘protected payment’ the court may order this to be shared upon divorce or dissolution.

Old state pension

If you reached State Pension Age before 6 April 2016, then you are likely to be bound by the ‘old state pension’, which is essentially your Basic State Pension and your Additional State Pension combined. It must be noted that the Basic State Pension cannot be shared upon divorce or dissolution, but the Additional State Pension could be.

How can I protect my pension?

Where parties are intending to marry or enter a cohabiting relationship, there are several agreements to consider to try and best protect your pension. These include:-

• Prenuptial agreements; and
• Cohabitation agreements.

Alternatively, where parties are married, it is still possible for a postnuptial agreement to be established if both parties are agreeable.