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Why are some spouses still failing to make pension claims?

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March 28, 2024

The other day the insurance, savings and investments company Aviva published its Family Finances Report 2018, detailing ‘the hidden cost of divorce and separation’. The report was mentioned here, in this post. Amongst the numerous findings of the report were that 22 per cent of females and 15 per cent of males made no claim on their former partner’s pension when they divorced/separated, and said that it was not included as an asset in the settlement.

This finding comes just weeks after the investment and pension firm Scottish Widows reported that divorced women were missing out on as much as £5 billion in pensions every year.

Why is it that, some seventeen years after the courts were given the power to make orders dealing with pensions on divorce, so many spouses are still failing to make the pension claims that they are entitled to?

Before I answer that question, just a little history. Contrary to popular belief, the courts regularly dealt with pensions on divorce, long before they were given specific powers to make pension orders. Yes, pensions were ‘protected’ by being beyond the power of the court to deal with directly, but the court certainly took them into account in any settlement, usually by making an ‘offsetting’ order, whereby the pension-owning spouse kept their pension, but the other spouse received the lion’s share of other assets to compensate.

The problem, of course, is that there aren’t always sufficient other assets to make an offsetting arrangement work. Accordingly, in 2000 Parliament gave the courts power to make pension orders, in particular pension sharing orders, whereby a percentage of the pension-holder’s pension fund is transferred into a pension fund belonging to the receiving party.

One might have thought that that reform would have solved the issue of pensions on divorce, by ensuring that spouses always got a fair share of the pension ‘pot’ on divorce. Why, then, does this not happen in so many cases?

I think the first thing to note about pensions are that they are not ‘visible’ assets, certainly not if they are not yet in payment. Unlike cash savings, for example, you can’t get your hands directly on the pension fund. Accordingly if, for example, a spouse wants money to rehouse themselves, they will look at other assets, and ignore the pension.

The second thing is that many people have little perception of the value of pensions. They can, of course, be extremely valuable, usually only second in value to the matrimonial home, and sometimes even exceeding the value of the matrimonial home. The Scottish Widows report indicated that the average retirement fund for a married couple is as much as £132,000. If spouses realised the true value of their partners’ pensions, surely more claims would be made.

The third thing is that retirement can be seen as very remote. This is, after all, the reason why so many younger people fail to make proper provision for their own pensions. Many people take little or no interest in pensions until they find themselves approaching pension age.

The fourth reason why claims aren’t made, with absolutely no disrespect intended, could simply be ignorance of the law. In these post-legal aid days many divorcing spouses do not have access to legal advice, and do not understand or appreciate their rights. The irony about this, of course, is that the cost of legal advice will usually be absolutely insignificant when compared to the value of the potential benefits of a pension order, as I saw an actuary point out on Twitter.

Which brings me to my fifth reason: pensions, and dealing with them, can be complicated. It may be that some spouses are fully aware of their rights, but are simply not prepared to enter into the ‘pensions minefield’ without professional help.

My final reason why claims aren’t made (and there may well be others) is a different kind of ignorance: ignorance of the existence of a pension. Many spouses may simply not be aware that their partner has a pension, and the partner may be reluctant to disclose it. Again, this is where access to legal advice comes in: a solicitor will explain that no settlement should be agreed without full financial disclosure by both parties, and that the court can force such disclosure if it is not made voluntarily.

The moral of the story is clear: if you are getting divorced, then if you possibly can, take some legal advice on your pension entitlement. It may cost you money in the short term, but it may gain you a whole lot more in the long term.

The blog team at Stowe is a group of writers based across our family law offices who share their advice on the wellbeing and emotional aspects of divorce or separation from personal experience. As well as pieces from our family law solicitors, guest contributors also regularly contribute to share their knowledge.

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  1. Andrew says:

    The ex-wife will often prefer the security of an out-and-out transfer of the house now to a pension decades away and if she does, she does. A DJ may jib at giving her half the pension without a Mesher on the house.

  2. Spike Robinson says:

    Surely if a judge signs a consent order without being satisfied that pensions have been considered and addressed, he or she is failing in his or her duty? So if there is a problem, for example a problem of ignorance, the judiciary are responsible. I’m not convinced that there is a problem. The pension industry report comes across as patronising as well as self serving. Maybe people are not as ignorant as they seem to think.

    One thing to consider is that many people will look at a pension valuation statement and prefer to take “money now” rather than money later. One thing that even judges sometimes struggle to understand is that a pension valued at £50,000 now is NOT the same as £50,000 of property equity, let alone £50,000 in cash. In my experience judges may weigh these as equal, but they are not. Economist and accountants understand this. Perhaps people ‘instinctively’ understand this better than judges do.?

    • Andree says:

      Spike: adult litigants can settle other litigation by consent without judicial approval. It’s not for the judge to second-guess the parties and in fact it should not even be necessary to put the agreement before a judge at all.

      • Spike Robinson says:

        While I tend to agree with you Andree, that’s not the law. As it stands the judge in a Family case has a duty to ensure a consent order is fair to both parties. Though in practice if they both had legal advice this is deemed sufficient evidence of fairness.

  3. Andrew says:

    For the avoidance of doubt Andree is your old friend Andrew being a bit cack-handed on the keyboard!

    You are right as the law is but it should be changed so that parties can reach binding settlements without judicial approval.

    • Spike Robinson says:

      Ah Andrew!

      A few years ago Andrew I would have strongly agreed with you. Now I only “mostly agree”. The reason being I do see the argument for the judge considering the interests of the children – none of whom are consenting adult parties to the consent order. It’s possible for two self interested adults to reach an agreement that suits both of them, but is not best for the children. And though I am wary of judges ability to discern what is best for the children, they do at least sometimes see that more clearly than one or even both parents do.

  4. Rory Miln says:

    An interesting article, John – thank you.

    I have two separate matters at the moment where I am acting for the wife and the husband’s pension is very valuable. Each is a paradigm case for pension sharing – there are not enough non-pension assets to make setoff an option. The psychology of the two matters is virtually identical: husband determined to keep his pension; wife wanting to keep things amicable and being reluctant to upset husband / rock the boat / be difficult.

    If I fail to persuade my client to insist on a pension sharing order, the court should reject the draft order. I wish I could be confident that the district judge will spot what appears to me to be a major and obvious unfairness.

    One of the two clients, on hearing my explanation of the court’s duty to ensure that the order is fair, even toyed with the idea of relying on that mechanism – it would be OK if the court said there should be pension sharing but not OK if the client or her solicitor said it.

    So – would you consider adding this ‘psychological’ reason to your list as reason no 7?

    • Andrew says:

      Is it possibly this? You can see a house as something you have both worked for, but a pension is the result of the work and contributions of one party only and he – usually he – will hang on to it for grim life.
      There is also the profound injustice, which should never have happened and should be reversed, that if an ex wife with a pension sharing order remarries she keeps the order. She should not. A pensioner should not have his pension reduced for the benefit of another man’s wife.

    • Spike Robinson says:

      I think that’s a very good insight. A lot of this is psychology. And parties do often prefer a court imposed settlement as it can be sometimes less acrimonious than difficult bargaining.

  5. Pete says:

    Before my divorce I had to put up with tears and tantrums from the ex because she didn’t have a pension, so after going to see someone about setting up a pension for her she said she would think about it. While thinking about it she found out that if we divorced or I died she would still get half of mine so never bothered getting one.
    In court the first thing the judge said was that she should get half my pension and bearing in mined that if I had always done what she wanted we would not have had the pension or the house, so Spike how can you say “As it stands the judge in a Family case has a duty to ensure a consent order is fair to both parties” . I’m now left with a pension that’s not enough to live on yet to much to claim anything, why is it always the case that the legal profession want to hack away at a mans pension even when the woman has refused to take one out her self ??

    • P says:

      I think you make a very important point. My own marriage was long and unhappy. My wife was content with the modest lifestyle my career could provide, and I stayed for the sake of my two beautiful daughters. During the 17 years we were together she worked in a lowly paid job as a receptionist, ironically for a single-handed solicitor (making absolutely no contribution to the family finances and abrogating much of her role as homemaker) but, more importantly, steadfastly refusing to make any pension provision – calculating, at the time, this would keep me trapped in the marriage. It was a topic of regular debate – that I always lost. She could have pursued a well-paid career in the public sector but simply did not wish to do so.

      When my job took me to another part of the country she refused to move – citing the fact that she was too happy at work (there were no other considerations). By this stage, we knew that the marriage would end and as a bargaining chip she promised she would not make a claim on my pension. When we separated, to her credit, she had her solicitor draw up a formal deed of separation that did, indeed, make no claim – but, had it gone before the family court it would not have been considered remotely “fair” under the MCA – and, there were insufficient funds to offset.

      Certainly, my pension will give me a modest lifestyle in retirement, but not if shared – if that were the case, I would not be able to pay the mortgage. At the time, she persuaded me not to seek consent and I have relied on this document for 15 years. My pension was already in payment at the time of separation and gave me sufficient income to support my daughters through university – I would not change this aspect. But, my ex is about to remarry and, now that I am close to retirement, I dread the Form E dropping through the letterbox!

  6. Andy says:

    My end result was. Both parties pensions were the same for reference about £140.000 CEV.
    House value was £270.000..Final outcome via Judge was The usual split of 70/30.
    Judge made a statement of no pension sharing as for obvious reasons and no other assests such as my smaller property and purchased prior to marage phew…

    All that was made clear a Mesher order until the youngest reaches or full time education so in essence the value of the Mesher over the years would stay the same but if the property value will increase then it’s at a loss to me..but end result Clean Break and no follow up….
    Not sure if any is relevant for the blog but in my case the judge made the right decision…justice…

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