For many people, the pension fund is the largest asset after the matrimonial home. Pension sharing on divorce or at the end of a civil partnership can help to achieve a suitable balance of splitting the assets. However, unless a ‘Pension Sharing Order’ is made then the benefits will usually be lost to one party, most commonly wives who have been the homemaker. Although it is also important to note that when dealing with the division of financial assets, the court has no bias in favour of the ‘money earner’ against the ‘homemaker’.
When a Pension Sharing Order cannot be given
In relation to co-habitees, no pension sharing order can between couples who are not married, even if the couple wish to do this. Neither can a pension sharing order be made when there is a judicial separation.
Cash value is the starting point
Whilst the starting point is the cash value of the pension, some schemes such as the Police and Fire Service provide retirement at a much earlier age than most other schemes. Therefore, it is necessary to consider the type of pension. It is common for solicitors to advise that a pension’s expert reviews what percentage of the pension is needed to provide quality of income for both spouses at retirement time.
Offsetting pension benefits
There are a number of ways to achieve a fair result in pension sharing, such as ’offsetting’. Offsetting is not a form of pension order, it’s simply a way in which the court takes into account that one party will retain certain pension benefits and the other will receive a larger share of the other assets, for example if one party wants to stay in the home due to health issues. Offsetting is sometimes considered where a pension is small, it may be expensive to have a pension sharing order.
Pension attachment orders
‘Pension attachment orders’ are not often used, but could be useful in certain cases such as when there is an age difference between the parties, where one party is receiving the pension but the other party would not be able to draw the pension for many years, as they are younger and may require income urgently. The pension scheme will pay the pension attachment direct to the person receiving the attachment order. This type of order can also be made against a lump sum payment and death in service benefits.
Can a pension be a non-matrimonial asset?
On occasion, a spouse may wish to argue that a pension built up prior to the marriage is a non-matrimonial asset. Whilst the court can ring-fence this asset, it will depend on all the circumstances of the case and if the other spouse’s needs cannot be met from alternative assets, then it is likely to be included when looking at sharing the assets.
Trace your spouse’s pension
Often a client will say that they are aware that their husband/wife had a pension, but they cannot find the details. The government has a free pension tracing service which can be found here.
When dealing with the division of financial assets and pension sharing, the court will look at all the circumstances of the case before reaching a conclusion. A Judge has a discretion when dealing with financial claims including pensions. In the majority of cases, a ‘pension report’ advising on how the pension could be shared, can help soon-to-be ex-spouses achieve a fair result.