Pensions are often one of the most valuable assets in a relationship, and how they are split on divorce in the UK can have a profound impact on each person’s future financial security. If you need answers to the question ‘How are pensions split in a divorce UK?’, the specialist divorce solicitors at Johnson Astills are perfectly placed to assist.
Please call us free now on 0800 059 0600 or complete a Free Online Enquiry and a member of the team will get back to you soon.
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The Role Of Pensions In Divorce UK
When a couple separates, the court looks at all of their assets, including pensions, before deciding what a fair financial settlement should look like. That can include workplace pensions, personal pensions, and, in some cases, additional state pension rights.
Because pensions are designed to provide income in later life, they are treated differently from other assets in a financial settlement. Pensions are incredibly complex, and it is rarely sensible to agree a divorce settlement without first understanding what each of you has built up for retirement. Many people are surprised to discover that it is the pension pot, and not the family home, that is the single biggest asset to be considered in the context of a divorce or civil partnership dissolution.
How To Work Out How Much Your Pensions Are Worth
To decide how a couple’s pensions should be split, accurate information about their value is vital.
To work out how much a couple’s pensions are worth, it is usually necessary to undertake the following tasks:
Identify All Schemes
Each party needs to list every pension they have. This includes current and former workplace schemes, personal pensions, stakeholder pensions, and any extra voluntary pension contributions made.
Obtain Valuations
For most pension schemes in England, you will need to obtain a cash equivalent from the provider. This figure is not the amount you could necessarily take out were you to draw your pension tomorrow, but it provides a way to compare different pensions on a broadly like for like basis.
Final salary schemes, public sector schemes, and some older pension arrangements can be particularly valuable. In more complex cases, an expert may be instructed to advise on fair options rather than relying on the cash equivalent alone.
At Johnson Astills, our law team can guide you through gathering the correct information and help you understand what those figures mean for your settlement in practical terms.
How Can Pensions Be Split Between A Divorcing Couple?
Once the couple’s pensions have been identified and valued, there are three main approaches the parties or the court can use to deal with them. They are as follows:
1. Pension Sharing
Pension sharing is a widely used method for dividing pensions in the context of a divorce.
When the court makes a Pension Sharing Order, it will set out what percentage of a particular pension is to be transferred to the other spouse. The person receiving the share then holds that part of the fund in their own name, either within the same scheme or in a new pension arrangement.
Because each party ends up with their own pension rights, pension sharing can help achieve a clean break and lets each partner make independent plans for retirement.
2. Pension Offsetting
Pension offsetting means one partner keeps more, or all, of the pension, and the other is compensated with a larger share of different assets. For example, they might be awarded more equity in the family home or a bigger lump sum from savings.
Pension offsetting can be attractive if, say, one spouse needs capital immediately, for example, to buy a new house, while the other is keen to keep their pension intact. However, it does have some notable drawbacks.
Firstly, the values being swapped, namely a pension for property or cash, may not be directly comparable, particularly when tax and future income are taken into account.
Secondly, the person giving up their claim to a pension may later face a shortfall in retirement income if the settlement is not carefully thought through.
You can minimise the risks inherent in pension offsetting by seeking professional advice from expert divorce solicitors like the ones at Johnson Astills. We will negotiate a settlement that achieves your goals while ensuring that you do not swap long term security for short term benefit.
3. Pension Attachment
Pension attachment is used less frequently for splitting pensions than the other methods described above.
Pension attachment involves the pension provider paying part of the pension income directly to the ex spouse when they fall due. In practice, this means that the person receiving the payments remains dependent on when and how their former partner chooses to draw their pension. If the pension member dies or changes their plans, this can affect what the ex spouse actually receives. These uncertainties are the main reason for most couples avoiding pension attachment arrangements.
How Johnson Astills Can Help With Pensions On Divorce
Pensions are an area where specialist family law advice can make a real difference to the fairness of your final settlement.
Johnson Astills’ divorce solicitors help clients across Leicester, Loughborough, and around the UK with all aspects of divorce law and practice, including pension sharing arrangements. If you are going through a separation, or thinking about starting divorce proceedings, and are unsure what will happen to your pensions, we are on hand to talk you through your options in plain English and help you make plans for your future.
Please call us free now on 0800 059 0600 or complete a Free Online Enquiry and a member of the team will get back to you soon.
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