A pension is often one of the largest assets people have when going through a divorce. It is important to deal with all financial matters when ending a marriage, as you could face a financial claim in the future if a financial order is not made by the courts.
When dealing with the splitting of assets, your pension and that of your former partner will be taken into account. There are various ways that a pension can be shared, should this be necessary to provide for a party who is in a weaker financial position.
If a pension is not dealt with during the divorce process, then it is possible that an ex-partner might inherit it if that individual is still named in an Expression of Wish and Nomination form lodged with the pension trustees when the pension was taken out.
We look at how pensions are handled on divorce and what happens when the pension holder dies.
Summary
This article includes:
- Will Your Ex Inherit Your Pension if You Die?
- Am I Entitled to My Husband’s Pension if We Get Divorced?
- How Are Pensions Split During a Divorce?
- Can I Claim My Ex-Husband’s Pension When He Dies?
- Did Your Ex-Husband Make a Will?
- What If You Have Remarried?
- How to Prevent Your Ex Getting Your Pension
- Grounds for Pension Disputes
Will Your Ex Inherit Your Pension if You Die?
In some cases, it could be possible for your ex to inherit your pension after your death.
If you do not have a financial order made or the financial order does not deal with your pension, then the pension trustees can pass any money owed to the individual named on the pension holder’s Expression of Wish and Nomination form.
When taking out a pension, it is usual to complete this form, telling the pension trustees what you would like to happen to any death benefits, such as a lump sum payment.
Pension trustees are not bound to follow the Expression of Wish form, however, and they have the discretion to decide who should receive any available money. They will look at issues such as the deceased’s family circumstances, whether they were supporting any children or other individuals at the time of their death, and whether there are new family members or a new spouse who came into the deceased’s life since the date of the Expression of Wish form.
If circumstances have changed, the pension trustees are likely to override the previous wishes.
Another way in which your ex could be entitled to a share of your pension is where the court has made a pension sharing order. This effectively means that part of your pension will belong to the other individual, and the death of the original pension holder will not affect the part of the pension that has been transferred.
Am I Entitled to My Husband’s Pension if We Get Divorced?
On divorce, the court will make a financial order dealing with the splitting of your assets and liabilities. As part of the process, both parties need to make full financial disclosure to each other. This includes sharing pension information. It is generally necessary to obtain an official Cash Equivalent Value (CEV) or Cash Equivalent Transfer Value (CETV) from the pension provider.
You can negotiate with your former partner to try to agree on how your assets will be divided. For example, if you wish to keep your pension, it might be possible for them to have another asset, such as the shared home, by way of compensation.
How Are Pensions Split During a Divorce?
Pensions can be shared in three ways on divorce:
- Pension Offsetting
- Pension sharing
- Pension attachment
Pension Offsetting
This is when the value of the pension is offset against another asset, such as savings, investments or property. The pension holder will retain the pension, while other assets are transferred to the non-pension holder.
Pension Sharing Orders
Pension sharing is when a portion of the pension is carved off and transferred into the name of the non-pension holder. That share of the pension then belongs to them, and they have the authority to draw on it when they want. This option can be part of a clean break financial order on divorce.
Pension Attachments
A pension attachment order requires the pension administrator to pay a share of the pension to the non-pension holder when the pension holder retires or decides to draw on the pension.
It is far less flexible than a pension sharing order, as the non-pension holder has no say over when or if the pension will be drawn. If the pension holder dies, then the non-pension holder will not receive a pension.
Can I Claim My Ex-Husband’s Pension When He Dies?
The first fact to check is whether the pension trustees are due to make a payout. It is not always the case that a payment will be made.
If a payment is due, you would not normally be entitled to this unless a court order is in place requiring it.
If you are divorced but you do not have a financial order in place or your former spouse’s pension was not disclosed at the time, it is sensible to speak to a divorce solicitor so that your position can be assessed.
Did Your Ex-Husband Make a Will?
You cannot leave a pension in your Will. Furthermore, if you divorce, then you will no longer be entitled to inherit anything left to you in your former spouse’s Will, and any clauses leaving assets to you will not take effect.
Assets left to a former spouse in a Will pass to the next beneficiary or beneficiaries named in the Will. If there are no other beneficiaries, then the assets will pass in accordance with the Rules of Intestacy.
What If You Have Remarried?
Remarriage does not affect offsetting or pension sharing.
However, if you have a pension attachment order, then this may well state that you will not be entitled to a share of your ex-spouse’s pension if you remarry.
Again, if you are considering remarrying, it is sensible to speak to a solicitor to check your financial position.
How to Prevent Your Ex Getting Your Pension
Pension Offsetting
If you want to retain your pension on divorce, you may need to consider offsetting. The courts always aim to meet both parties’ reasonable financial needs on divorce, and if one party is in a weaker financial position, the court may give them a larger share of the available assets.
The factors that the courts consider in dealing with financial matters on divorce are set out in Section 25 of the Matrimonial Causes Act 1973.
All assets need to be disclosed in full at the start of the process of obtaining a financial order, and your solicitor will be able to advise you on your options.
If you want to keep all of your pension for yourself, you may be able to do this if your ex has a larger share of other assets, for example, the matrimonial home.
Clean Break Order
Securing a clean break order when you divorce can help avoid unresolved financial issues in the future. Your pension will be dealt with at this time, and you can then decide whether you need to make any additional provision, for example, to increase the size of your pension pot.
Update Your Pension Beneficiary Nomination Forms
It is important to ensure that the pension trustees have an up-to-date form stating who you wish any pension benefits to pass to in the future, as a pension is not covered by your Will.
Put a Prenuptial Agreement or Postnuptial Agreement in Place
A prenuptial or postnuptial agreement can set out how you and your future or current spouse will deal with financial matters, including in the event that you divorce or separate. You can include what you want to happen to your pensions in this document. Provided that certain criteria are met when the document is drafted and signed, the courts will usually follow the terms of this type of agreement.
Grounds for Pension Disputes
During the process of obtaining a financial order on divorce, disputes can arise over the CETV. This is a complex calculation, and certain types of pensions are harder to value than others. Defined benefit schemes, sometimes referred to as final salary pensions, can be contentious, as they rely on assumptions about salary, life expectancy, inflation and market conditions. It is particularly hard to accurately value a CETV for younger pension holders.
It may also be possible to contest a decision made by the pension trustees over payment of death benefits. Grounds for contesting the nominated dependant include:
- The beneficiary form is outdated and it would no longer be fair to follow the request; this is often used to persuade pension trustees that a former spouse or partner should no longer benefit
- The individual nominated was not financially reliant on the deceased
- There is a court order dealing with pension provision that overrides the nominee form
- The pension trustees’ decision is not reasonable
Contact Our Divorce Financial Settlement Solicitors
If you have questions about how a pension is dealt with on divorce, our family law solicitors can advise you. You can ring us on 0300 303 2071, email us at info@witansolicitors.co.uk or fill in our contact form and we will talk through your situation with you and discuss how we can assist. We have offices in Birmingham, Northampton, London and Wellingborough.
