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Pensions that are included in financial settlements:

  • Personal pension schemes (including money purchase schemes, self-invested pension plans)
  • Employer pension schemes
  • The State Pension

Whilst personal and occupational pension schemes can be shared (see below), the basic State Pension is not shareable. However, the court can still factor the income that is expected to be received from the State Pension into its analysis when considering the division of assets and pension sharing on divorce.

How do you divide a pension?

The capital values, projected income in retirement and rules of the individual pension scheme will all help inform which option will work best for you. It is important that you get professional advice from a solicitor and consult a financial advisor before you take any

The main options for dealing with your pensions are:

The main options for dealing with your pensions are:

  • Pension sharing

    If this route is the best option for you, you will get a Pension Sharing Order as part of your financial settlement.

    This means that you get a percentage share of any one (or more) of your spouse’s/civil partner’s pensions. This share will be transferred into a pension in your own name. You can either be kept as a member of the fund that is being shared, or the share can be transferred out into an alternative fund.

    Some schemes (such as the main public sector schemes like the NHS) require you to remain a member of that scheme, while others do not permit this and require a transfer out. Other schemes will offer an option so you can choose which is best for you.

    There may be better benefits available from the pension if you are allowed to remain a member of your spouse’s scheme. If the pension is transferred to you, and you don’t already have your own pension, you’ll have to set one up.

    An independent financial adviser will be needed to assist with this and advise as to what the best option is for your individual circumstances.

    Pension sharing on divorce can only be achieved through a court order, known as the Pension Sharing Order. This order sets out how much of the pension(s) will be given to you or your ex-spouse and can only be made when your divorce or dissolution is complete through the court pronouncing a final order.

    If you have a Pension Sharing Order, you will receive a transfer of a percentage of the pension into a new pension fund in your name. You will then be able to draw funds from that – whether as income or lump sums – in accordance with the rules of the scheme and subject to any tax payable.

    Pension sharing orders mean that even if the paying spouse dies, the pension sharing will be unaffected.

  • Pension offsetting

    Pension offsetting is where one of the parties will retain a greater share of another asset, instead of receiving a share of the pension.

    For example, you might get a bigger share of the family home while your ex-spouse keeps their pension.

    However, it is very important to recognise that it is not an easy exercise to compare the value of a pension – which is usually a future income stream – against the value of a property or money you have in the bank which are immediately available to you.

    Additionally, the figures that many pension funds provide for an immediate capital value of the pension can be misleading and so advice from a lawyer and financial adviser is always required before agreeing to an offset of pensions.

    Pension offsetting is only possible if there are enough non-pension assets that can be used in an offsetting exchange.

Pensions and Divorce FAQs

Pensions and Divorce FAQs

  • What is a pension attachment order?

    A Pension Attachment Order, or earmarking, is when some of the pension is earmarked so that when it starts being paid out – when the pension-holding spouse retires – a portion, or all of it, is paid to the receiving ex-spouse. This does not include State Pension benefits.

    The pension still belongs to the scheme member but it will be paid to the receiving spouse as either a lump sum or regular maintenance payments when the scheme member retires in accordance with the specified percentage. Payments cannot be taken before this.

    Unlike pension sharing orders, pension attachment orders terminate on the death of the paying spouse. They also do not provide opportunity for a clean break, and ex-couples may need to be in contact for many years.

    There is also no set date that the scheme member must start taking pension income, which means if they delay retirement or die before retirement, the receiving party is potentially left financially vulnerable. For these reasons, they are rarely used in practice.

  • Splitting your pension after you have retired

    If you and/or your ex-partner have retired when you get divorced and your pensions are in payment, the pensions can still be split as they would if they were not in payment.

    However, you may be restricted in how you then deal with these pensions as it is not possible to take a lump sum from a pension that is in payment or one that has been used to purchase annuity.

  • Do I need a court order?

    Only a court can make a Pension Sharing Order or a Pension Attachment Order (earmarking order) following a divorce. Pension offsetting does not require a court order, but we would always recommend getting an order to ensure certainty and enforceability should something go wrong.

    You should take advice from a family lawyer who knows about divorce and pensions as the rules are complicated. At Stowe Family Law, we have many members of our team who have extensive experience in dealing with this complex area of law and would be more than happy to sit down with you and discuss your options. We can also put you in contact with a financial adviser who can assist you.

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Contact Stowe, pension and divorce (UK) specialists

We are Stowe Family Law solicitors, and we have extensive experience helping people work through the financial implications that come along with divorce. We can aid your case with a hands-on approach to divorce and finances, using all of our expertise to make things easier for you.

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