Last Thursday, Age UK published a new report called ‘For Love and money: Women’s pensions, expenditure and decision-making in retirement’. This report rather surprisingly called for ‘urgent reforms to the divorce process’ so private pensions are split fairly and women do not lose out. I was contacted by Channel 5 to see if I would appear on Channel 5 News to help the public understand more about pensions and divorce.
When I met with Katherine Nash, the presenter of 5 News, she commented that she and the producers were fascinated that pensions were not considered as part of the divorce process. I advised her that I felt the report was slightly misleading before she rushed off saying let’s chat more about it on air.
Katherine started the show expressing that when a couple gets divorced you are used to hearing how they have divided up their house, their furniture, the car etc but you rarely hear anyone talk about pensions.
K: Why are we not seeing women fighting for a pension pot?
SJL: This is very misleading as those who seek legal advice are fighting for pensions and at least having those discussions with solicitors.
I went on to say that I felt the report was reflecting those who reached settlements away from the court and legal advice.
K: What difference would it make to women’s lives if they could access their ex-partners pensions?
SJL: It could make a substantial difference, particularly at the age of retirement, and may lead to people being able to meet their outgoings more comfortably.
K: Why are women entitled to their husband’s pension, particularly if they have their own?
SJL: This can work both ways. It is not just women, men also take a career break during the marriage, for example, to bring up children and therefore their pension contributions are reduced. These contributions should be shared as bringing up children is an equal contribution to income and the family home.
Katherine was then interested to know what about pensions that existed before a couple even met?
SJL: Pensions are unusual. They are an asset that increases in value over time and with ongoing contributions, they appear to be like a bank account. In reality, it is a pot which is accumulating as a future income stream when you retire. Whether the amount of pension accumulated before the couple met should be taken into account depends on a whole range of circumstances including what both parties need, how long they were married for, their ages and what other financial resources are available. It is possible to successfully argue that pre-marital pension should not be shared but it will depend on the circumstances of each particular case.
I then went on to clarify that there are different options as to how pensions can be shared in a divorce settlement, for example by way of a pension sharing order. This is where part of one party’s pension pot would be split and put into a pension pot in the spouses’ name. Another way might be by an offset of capital, i.e. one party receiving a greater lump sum of cash now instead of receiving a share of the other party’s pension.
The advice I would give when considering divorce is to take legal advice as soon as possible. You need financial advice to properly understand the value of the pensions in your marriage. There are lots of different types of pensions out there and it can be highly risky to compare one pension scheme to another on a like for like basis.
Unless you are aware of your entitlements and what the Court would potentially order, reaching a settlement outside of Court can negatively impact on your settlement.
If you or anyone you know is considering or proceeding with a divorce, speak to one of our experts to take advice before you proceed.