When you divorce, you should have a financial order made, setting out how your assets and liabilities will be dealt with. This includes details of what will happen to any pension provision that you or your spouse has.
Even if a pension is in one person’s name, the court may decide that the other person is entitled to a share of it. In some circumstances, you may be able to keep your pension on divorce, but this will depend on the assets available and the financial needs and resources of each party.
A pension may be one of the largest assets to be dealt with on divorce, and it is essential to have specialist advice to ensure that you have the financial provision you need for the future.
Key Stages in Dealing with Pensions in Divorce
1. Pension Valuation for Divorce
The first stage in dealing with a pension in divorce is to obtain a cash equivalent value or CEV of all pensions held by you and your former partner. Your solicitor will be able to request a figure from your pension provider, and it may also be necessary to obtain an opinion from an expert pensions actuary.
Certain types of pensions may be more complex to deal with in divorce cases, particularly those where a divorce could negatively affect the value of the pension provision if it is not dealt with in the right way. If the pension provision you or your former spouse has is substantial, you should use a solicitor with expertise in dealing with pensions in divorce.
2. Financial Disclosure
As part of the divorce process, you and your former partner will need to make a full financial disclosure to each other. This includes providing a valuation of any pension you hold. Your solicitor will assist you in completing the relevant documentation, usually a Form E (Financial Statement for a Financial Order).
3. Professional Financial Advice
You may need advice on pension valuation from a financial expert, along with your cash equivalent value. This is because pension provision is complex, and the CEV may not accurately reflect what would happen in the future, should you divorce.
Issues such as the future value of pension holdings and length of service may also affect the valuation, and a pensions actuary will be able to provide an expert opinion on the value of any holding.
4. Agreeing on Pension Issues in Divorce
When dealing with financial issues during divorce proceedings, it is preferable to try to reach an agreement with your former partner rather than go to court.
Your solicitor will be able to advise you on what is reasonable to expect and will negotiate on your behalf to try and secure the right level of financial provision for you for the future.
If it is possible to agree on a division of all of your assets and liabilities, your solicitor will send a draft order reflecting the agreement to the court. If the court agrees with the terms agreed, it will seal the order, making it binding.
5. Mediation
Where it is not possible to agree on financial matters, you will usually need to consider mediation before you can ask the court to intervene.
You will attend a mediation information and assessment meeting with a neutral mediator who will explain how mediation works. If you both decide to try mediation, the mediator will help you and your former partner explore potential solutions. A mediator does not have the authority to impose a binding solution.
6. Arbitration
Another option is arbitration. This is a form of private law resolution. You and your former partner would employ an experienced arbitrator to rule on your case. Their decision would be binding on you both. This is generally a faster option than going to court.
7. Litigation
Where you and your partner cannot agree on a way forward, your solicitor can apply to the court for a financial order. The matter will be listed for hearing, and the court will look in detail at your financial needs and resources, making the order it believes will meet both of your requirements.
This could involve splitting or apportioning pension provision.
Options for Pensions in Divorce
Pension Offsetting
If you want to keep your pension, it may be possible to offset its value against another asset. For example, your spouse could have your share in a property or more savings instead of a share of the pension.
Pension Sharing Order
Another common option is a pension sharing order. This means that part of a pension is divided off and put into a separate pension for you. This is then under your control, meaning you can choose when to draw on it, once you are of pension age.
Pension Attachment or Pension Earmarking
An alternative, which is less frequently used, is pension earmarking or a pension attachment order. This grants one party a share of the pension holder’s pension income once they begin to draw the pension.
There are disadvantages to this option. The person entitled to a share will have to wait until the holder decides to draw down their pension. If the pension holder were to die, the pension would not be available when the time comes. For these reasons, a different choice is usually best.
Deferred Pension Sharing Order
In some cases, a pension sharing order is useful. This allows an order to be deferred until the receiving party becomes eligible to draw from the fund. For example, if the receiving party is too young to benefit from a pension at present, they may need maintenance in the meantime. A pension sharing order can be deferred until the receiving party is old enough to receive pension funds.
How Do the Courts Deal with Pensions in Divorce?
In dealing with financial matters on divorce, including pensions, the court will look at the following issues, as set out in Section 25 of the Matrimonial Causes Act 1973:
- The income, earning capacity, property and other financial resources available to each party, now and in the foreseeable future, including any increase in earning capacity that it would be reasonable to expect either party to acquire
- The financial needs, obligations and responsibilities each party has, now and in the foreseeable future
- The standard of living enjoyed by the family during the marriage
- The parties’ ages and the duration of the marriage
- The contributions each party has made or is likely to make in the foreseeable future to the welfare of the family, including looking after the home or caring for children
- The conduct of the parties, where the court believes it would be inequitable to disregard this
- Any benefit the parties would no longer be entitled to because of the divorce
The court will prioritise the needs of any child of the family when considering what order to make.
If one party is in a financially weaker position than the other, the court may decide to grant them a larger share of the assets.
Further Reading
Contact Our Divorce and Pensions Solicitors
If you have questions about dealing with pensions in divorce, please feel free to call us, and we will be happy to help. For more information on our services, see our divorce and finances page.
To speak to one of our expert divorce and pensions solicitors, ring us on 0330 173 3980, 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.
FAQ
Is my ex entitled to my pension on divorce?
Whether your ex will receive a share of your pension on divorce will depend on a range of issues, including their financial needs and the available assets. If you do not want to share your pension, it may be possible to keep it, with your ex receiving a larger share of other assets instead.
How is a pension valued in divorce?
An initial valuation or CEV is obtained from the pension provider. It may also be advisable to obtain an actuarial report in more complex or high-value cases.
How will divorce affect my pension provision?
Your pension may be split on divorce, or you may be awarded a share of your former partner’s pension fund. If you have questions about ensuring you have adequate pension provision for the future, you may wish to speak to an independent financial adviser.
They will be able to advise you on the amount to save and how best to structure your finances.
How do you protect your pension in a divorce?
All assets and liabilities need to be disclosed on divorce. If you cannot agree on a way forward with your former partner, the court will decide how these will be split.
If you want to protect your pension, you can negotiate to try and keep your pension, giving your former partner more of the other available assets in return.
