When you are working out a financial settlement during a divorce, pension assets should be taken into account when coming to an agreement. At Witan Solicitors our team can advise you of the amounts involved and represent you in negotiations to ensure that your interests and rights are protected.
A pension is often a substantial asset, although it can be hard to value for the purposes of a divorce settlement. Often, there are several different pension funds involved, and a spouse may be entitled to a share in any or all of them, depending on circumstances.
Valuing a pension for divorce purposes
Pensions are valued by the provision of a Cash Equivalent statement provided by the pension trustees for a fee. On divorce, individuals will need to obtain a Cash Equivalent value for each pension that they hold.
When payments are made from the fund in due course, tax will be payable, and this should also be taken into account in the calculations.
You do not have an automatic right to know the value of your ex-spouse’s pensions, but you may choose to exchange this information through your solicitors to assist in reaching agreement over financial settlement.
The three ways in which a pension can be shared on divorce
There are three main options for including the value of a pension in a divorce settlement, as follows:
Pension sharing
A pension sharing order is when one spouse is given a percentage of the money in the other’s pension fund. The money is either transferred into a pension for you or your name will be added to the existing scheme.
Pension attachment
If a pensions attachment order is made in your favour, you will receive payments from your ex-spouse’s pension when payments from it commence. This could be by way of part of the lump sum and/or pension income. The pension trustees will be instructed by the court to make the payments to you when the time comes. With this option, you would need to wait until your ex-spouse decides to start taking their pension.
If you are younger than your spouse, then the payments could be deferred until you reach retirement age.
Pension offsetting
The value of a pension is commonly offset against the value of other assets in a divorce, particularly where a family home is involved. For example, one party may receive the house, while the other keeps the full benefit of their pension.
There are advantages and disadvantages to each method of pension division or sharing and it is important that you discuss these with a qualified professional who can explain them to you and ensure that you receive the best option for your circumstances.
In summary
Pensions in divorce is a particularly complex area and it is always advisable to speak to an expert before agreeing to any division or offset to ensure that your rights and interests are adequately protected.
You may reach agreement with your ex-spouse without the need for litigation or you may need the court to rule on the subject. It is important that any agreement reached between you and your ex-spouse is put in writing and, where necessary, approved by the court by way of a consent order.
For more information about reaching a financial settlement in divorce in the current climate, see our article Settling a dispute about matrimonial finances during the pandemic.
Contact us
At Witan Solicitors our Family Team are experienced in dealing with all of the financial aspects involved in a divorce, including the complex area of pension sharing and division. If you would like to talk to one of our expert solicitors, email us at info@witansolicitors.co.uk or fill in our contact form.
