A Guide to Pensions and Divorce
15th October, 2024
When it comes to the dissolving of marriages and civil partnerships, one thing that often gets overlooked is pensions. Because pensions are only ever in one name, many do not know that the court treats it as an asset that can be shared.
In this article we’ll tell you what you need to know about pensions and divorce, and how our divorce solicitors can help.
How does family court deal with pensions?
Ultimately, the court recognises that each case is different. However, the overall aim is to get a fair outcome for both parties.
Judges have the ability to share all your assets, including pensions and savings, in a way which first meets the needs of children.
There are many factors that the court will consider when deciding a divorce financial settlement. However, the main ones tend to be each party’s needs, the contributions the parties have made to the marriage, how long the marriage lasted, the standard of living enjoyed during the marriage, and most importantly, children.
There are three main ways that pensions can be divided upon divorce:
Pension sharing
Pension sharing allows pension assets to be split immediately, allowing a clean break and each party the ability to independently decide what to do with their share.
However, a pension can only be shared if it has been approved by the court, through a Pension Sharing Order.
Although ‘sharing’ is in the title of this article, it doesn’t necessarily mean sharing equally. Many different factors will be taken into consideration when deciding what the share ratio will be, including age difference and entitlement differences.
Offsetting
Many separating couples choose to go down the route of offsetting, as it is a simpler process that can be done without court involvement.
In this method, you can trade pension assets for other assets you currently have. For instance, one party may keep their entire pension fund, while as a trade, the other may get the family home.
Although it can be done without a court order, it is still a good idea to seek support from our divorce solicitors, because without a financial order, years down the line one party may still be able to apply to the court requesting further financial orders. So making your agreement legally binding in the present, and imposing a financial clean break to prevent applications to the court in the future, will allow you to be more secure.
Pension attachment orders
This is another order that the court can make, which essentially allows another individual to be attached to someone else’s pension.
A percentage of one party’s regular pension payment is paid to the other party each week or month. The same thing will happen if the paying party receives a tax free lump sum from their pension – a percentage will go to the other party.
However, these orders are rarely used because they come with several pitfalls. With this approach, the person receiving the percentages can only do so when the other retires, so they may have to wait, sometimes for a significant amount of time. Further, the attachment order would not survive the remarriage of the receiving party or the death of the paying party.
Divorce financial settlement with Ward Hadaway
At Ward Hadaway, our divorce solicitors have years of experience in dealing with all aspects of divorce and financial settlement and are here to provide you with professional support and advice. Discuss your divorce and finances with our team here.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
This page may contain links that direct you to third party websites. We have no control over and are not responsible for the content, use by you or availability of those third party websites, for any products or services you buy through those sites or for the treatment of any personal information you provide to the third party.
