• 10 DEC 15
    What happens to your pension when you divorce?

    What happens to your pension when you divorce?

    Christmas and New Year is the time of year when many marriages reach their final breaking point and as a result there can be a flurry of divorce enquiries after the festive break.

    Solicitor at WHN, Mark Taylor, warns that couples looking to divorce can often overlook or forget to deal with their pensions because there are so many issues to deal with, particularly if young children are involved. Nevertheless, the value of a person’s pension is frequently the largest asset of the marriage and sometimes even greater than the equity of the matrimonial home.

    If you get divorced, or dissolve a civil partnership you are able to settle elements of your finances by negotiation or through mediation by offsetting your pension.

    Pension offsetting is where one spouse keeps all their pension benefits and gives the other a greater share of the family home or other asset. Offsetting allows those with a healthy pension pot to keep it intact during the divorce.

    Former couples who are unable to settle will need to attend court to determine the settlement or agree a court order by consent.

    In England and Wales, a spouse can be entitled to up to half of the main breadwinner’s pension, as well as the tax-free lump sum and can lay claim to a percentage of their partner’s pension pot in Court. This is called pension sharing.

    Before a couple can identify how much they will receive from a split pension, a valuation is required. Valuing a pension is a complex process, especially if the pension is in a defined contribution scheme where the total value of the pension pot fluctuates depending on its investments or where the pension is final salary scheme such as police officers, teachers, doctors etc.

    However, this option is popular as it provides a clean break in the divorce allowing each partner more direct control over their finances.

    A less common method of carving up pensions is earmarking. This kind of agreement, otherwise known as a pension attachment order, is where a person receives money from their ex-spouse’s pension but not until that pension is actually paid, which can be many years in the future.

    Those wishing to receive some of the future pension would have to wait a number of years and they could risk ending up with nothing if their former spouse dies before they retire.

    The issue of pensions in a divorce is an extremely complex and confusing area and it is essential that both husband and wife gain expert legal advice.

    For more information please call Mark Taylor on 0161 761 4611 or email mark.taylor@whnsolicitors.co.uk