Pensions and Divorce Guide

Pension sharing on divorce

Pensions are a very important part of any financial settlement. If you have questions regarding your finances and how they will be affected during divorce proceedings. Contact our Family and Relationships team on 01284 767766.

Pensions have always been an important part of any financial settlement on divorce. A pension can be the largest asset, sometimes worth even more than the home.

Most pensions provide a widows/ widower’s pension of half the pension the holder would receive on retirement. On divorce, the other party is no longer a spouse and so loses the chance of receiving this benefit. Many work pensions also provide a death-in-service payment, of a substantial lump sum if the employee dies whilst in employment which is only payable to a spouse and so is lost on divorce.

How can a pension be divided?

Sometimes the other party is compensated, by them having a larger share of the home, or other assets. Nowadays, pension orders can be made instead, either an “attachment Order” or a “sharing Order”. For an attachment order, the pension holder retains his or her pension and on retirement can choose to take up to 25% of this fund as cash and then receive a reduced pension. The ex-spouse can then receive all or part of the holders per annum pension and/or part of the lump sum. However, if the ex-spouse marries before the holder’s retirement, he or she will not receive anything. If they remarry after, any per annum payment will cease. Further, if the holder dies before retirement, the ex-spouse will not receive anything.

Alternatively, the pension can be “shared” on divorce, rather than the division having to wait until retirement. The ex-spouse receives a pension credit for their own pension fund and the holder’s pension fund is debited by that share. As the fund passes on divorce, remarriage of the ex-spouse, or death of the holder does not affect the fund.

If you have a work or personal pension with benefits payable to your spouse on your death prior to retirement you may, if possible, wish to nominate someone other than your spouse to receive this benefit pending long-term financial matters being resolved as part of your divorce. We may be able to help you clarify this, or you may wish to contact your pension provider or financial adviser.

How is the value of a pension calculated?

Pension are valued by means of a Cash Equivalent Transfer Value (CETV). This is the figure which the pension provider would transfer to another pension fund if requested to do so. A Pension Sharing Order would provide for a particular percentage of the CETV to be transferred to a spouse.

Our Family and Relationships team support clients with Separation, Cohabitation, Divorce, Children, and other Family Law matters across Suffolk, Norfolk, Essex, and Cambridgeshire. We have offices in Sudbury and Bury St Edmunds. Get in touch today to arrange an uncharged consultation.

Please note this article is provided for general information purposes only to clients and friends of Atkins Dellow LLP. It is not intended to impart legal advice on any matter. Specialist advice should be taken in relation to specific circumstances. Whilst we endeavour to ensure that the information in this article is correct, no warranty, express or implied, is given as to its accuracy, and Atkins Dellow LLP does not accept any liability for error or omission.

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