How pensions are treated in divorce settlements is a key area that many of our clients are concerned with. Whilst other factors, such as arrangements for children and housing, may be front of mind and consume a large aspect of the emotional and practical side of divorce, the impact of your separation on your pension is vital to consider in terms of your long-term financial security.
What happens with pensions in a divorce?
Pensions that have been built-up during a marriage or civil partnership are matrimonial assets and available for division between the spouses. Similarly, pensions accrued before the marriage may also still need to be considered. Dividing pensions is a complex area of divorce and finance cases, as calculating the value of the pension is not always straightforward, as pensions can be valued in different ways. For example, there may be pension benefits available to a spouse or civil partner under pension schemes which include sums that would be paid to you or your children on a spouse’s death, which may cease with divorce. When negotiating a financial settlement, the value of these pension benefits should be taken into account.
When it comes to the treatment of pensions in divorce settlements, there are three main options:
- Pension offsetting; this is where the pension is not shared or divided, but the ex-spouse receives a different asset instead.
- Pension Attachment/Earmarking; this is when a proportion of the pension income is paid to the ex-spouse when the holder of the pension decides to draw pension benefits.
- Pension Sharing; this is the most common scenario, which is where the pension fund is physically split and transferred to another arrangement or existing pension.
In some cases, pensions can be transferred immediately. In other circumstances you may receive a percentage share of the pension when your former spouse or civil partner has retired. The person who receives a share of the pension can either become a member of their former partner’s pension scheme, or can transfer the value of the scheme to another pension, depending on the rules of the scheme.
Our team of specialist family law solicitors have extensive experience in pensions and divorce and we help clients achieve the best outcome in divorces involving pension funds, including funds of a significant size and foreign pensions.
Do pensions get split in divorce?
In the simplest terms, yes, pensions are considered as part of the financial settlement in divorce and you may find yourself receiving a share of your ex-spouse’s pension fund, or indeed having to divide or share your pension with your spouse.
In contrast, cohabiting couples do not have an automatic right to benefit from their partner’s pension, unless they are named formally as a ‘nominated beneficiary’. The legal approach to unmarried couples is far less cohesive, and the position of an unmarried partner can be highly precarious in comparison to their married equivalent. It is therefore essential that unmarried couples are aware of how they can protect themselves in the event of a future separation, which can be achieved through the preparation of a cohabitation agreement which can include how pensions are treated.
Can an ex spouse collect your pension?
When it comes to treating pensions in divorce settlements, the concept of ‘full and frank’ disclosure applies. This means that each person must disclose information about all assets, including pensions, which are a financial asset in the same way that savings or property are. Full and frank disclosure applies whether you are dealing with matters through the court or through any alternative methods of resolving family disputes, such as mediation or collaborative law.
How and whether your pension can be protected will depend upon the particular circumstances of the case. Typically speaking, the longer a couple has been married or in a civil partnership the less likely it is that assets brought to the marriage will be protected.
How do I protect my pension in a divorce?
We understand that if you accrued a pension before your marriage that you may wish to protect it. It may be possible to ringfence a pension that was acquired prior to the marriage if the financial needs of the parties can be met without it. Our team of specialist lawyer can advise you ways to protect your pension in a divorce.
How our divorce settlement solicitors can help with your pension
Our team of specialist family lawyers have extensive experience in financial proceedings upon divorce and separation, including the treatment of pensions in divorce settlements. We also have extensive relationships with a network of specialist financial advisors who we work alongside to ensure the best outcome for your financial needs following divorce or civil partnership dissolution.
We aim to adopt a non-adversarial approach to resolving financial matters and encourage clients to use alternative methods of dispute resolution, including Mediation, Arbitration and the Collaborative Law model.
Uniquely, we also have particular expertise in Armed Forces Pensions. Our specialists in this area, Hazel Manktelow and Emily Pain, regularly advised serving members of the armed forces, former members of the armed forces and spouses of a serving or former member of the armed forces.