While the family home is often at the centre of attention during divorce proceedings, the division of pensions can be an oversight.
Pensions are often the second largest asset after the matrimonial home though, so it’s vital to ensure they are divided correctly to ensure your financial future is secure.
When a couple divorces, a financial declaration must be completed by each spouse so that any assets – including the matrimonial home, pensions and savings – can be fairly divided.
It is vital to incorporate pensions into these financial proceedings, as your former spouse could instead make a claim on your pension in the future if it isn’t decided upon at the time.
When deciding how to share a couple’s finances when they part ways, the court takes into consideration whether there are any children in the family, who has custody and spousal maintenance, as the first priority of the court is always to ensure that any children are catered for financially.
While some may think it’s unfair to divide their pension pot when they’ve worked to build it up over the years, pensions can be included as joint assets in divorce proceedings.
This is often the case when one spouse has stayed at home to help bring up any children of the family, so hasn’t had the equal opportunity to build up a pension pot of their own.
The pension pot
Pensions are an extremely complicated area and often require specialist advice, particularly if one spouse has a defined benefits scheme with the NHS, the police, fire service or a teachers’ pensions.
Defined benefit schemes often have additional benefits which need to be factored into any asset division decision on divorce, so these pensions and their values should not be taken simply at face value – it is unwise to compare the two types of pensions even if they have an equal cash equivalent value.
A pension sharing order may be used to share one party’s pension by way of a percentage value with their spouse or ex-spouse, or offsetting by way of one spouse receiving more capital, for example a larger share in the equity of the property.
Defined contribution schemes also need to be considered carefully and compared with defined benefit schemes to clarify the whole of the benefit package, when the package can be obtained and the income stream they can both generate.
These are particularly important considerations when one party may be financially dependent upon income from a spouse or ex-spouse’s pension for the remainder of their life.
WHN has a number of solicitors with a wealth expertise in this area and the firm also has the benefit of an independent financial adviser to ensure your pension is divided fairly on divorce.
For information on dividing your pension on divorce, or for advice on any other family law matter, contact Louise Daniel on 01706 213 356 or email her at louise.daniel.@whnsolicitors.co.uk