When it comes to your divorce or dissolution, make sure you know where you stand when it comes to your divorce and pension. Often a pension can be the most valuable asset that is taken into account.
Make sure you know what options are available to you when you come to discuss your pension. If you choose to share your pension, you will be agreeing to put this pot of moment into a financial settlement order. However, if you are a teacher or NHS worker, ensure you are aware of the recent financial settlement delays.
Delays for Divorcing Teachers and NHS Staff
Whilst the Treasury recalculates public sector pensions, divorcing teachers and NHS staff face delays to their financial settlements.
The Treasury announced delays in March and promised a solution by Summer. However, police officers, firefighters and armed forces personnel are expected to be next in line.
Financial Settlement Orders
When parties are finalising their financial arrangements through either court proceedings or consent, they must provide full and frank disclosure of any property, savings and pensions they possess.
Pensions hold significant value in a divorce, often ranking second only to the family home in importance and occasionally surpassing it in value. When going through a divorce, the treatment of pensions becomes a crucial aspect of the financial settlement.
There are three main methods to share put pensions in a financial settlement order or agreement:
- Offsetting
- Earmarking
- Sharing
Pension Offsetting
In pension offsetting, instead of directly dividing the pension itself, the value of the pension is offset against other assets or financial considerations. This means that one spouse may retain the pension, while the other spouse receives a larger share of other assets, such as the marital home, savings accounts or other property. The value of the pension is essentially used as a bargaining tool or means of achieving an equitable distribution of assets.
Pension Earmarking
Pension earmarking, also known as pension attachment or deferred division, divides pension benefits during a divorce or dissolution of a marriage. It involves designating a portion of one spouse's pension or retirement benefits to be paid to the other spouse as part of the divorce settlement.
Under pension earmarking, rather than transferring a portion of the pension funds directly to the other spouse, the court orders the pension scheme or plan to make future payments to the recipient spouse when the pension becomes payable to the member spouse. These payments are typically a percentage of the pension income or lump sum benefits received by the member's spouse.
The key characteristic of pension earmarking is that the recipient spouse does not gain immediate access or ownership of the pension funds. Instead, they receive payments directly from the pension scheme or plan as and when the member's spouse becomes eligible to receive their pension benefits.
Pension Sharing
Pension sharing is when the pension pot is split into two individual pots from the date of the divorce.
As a starting point, pensions and all other matrimonial assets are divided on a 50:50 basis. This split will alter based on the needs and circumstances of each party. Factors taken into consideration may include the financial means of each spouse, their health and age, the length of the marriage, contributions made to the marriage and if the parties have any children from the marriage.
Requesting a CETV
If one or both parties have a public sector pension, they must request a cash equivalent transfer value (CETV) to determine its current value. In March, the teachers and the NHS pension schemes suspended any calculations of CETV temporarily whilst the Treasury awaited new “factors”. The duration of the suspension remains uncertain.
Contact Our Family Solicitors
Our family law solicitors have extensive experience in discussing and arranging financial settlement orders. If you’d like to get in touch with our skilled family lawyers, you can reach us through our various channels. You may send us an email at info@witansolicitors.uk, or complete our contact form, and we will promptly discuss your circumstances with you and explore how we can provide assistance. We maintain offices in Birmingham, Northampton, and London.
