Pension Sharing
Our specialist Divorce Solicitors in Cheshire will be by your side, expertly supporting you through your divorce. We are specialists in working through the division of assets and finances during divorce proceedings.
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Pension In Divorce is a complex matter, especially as there’s a lot to think about during divorce or dissolution of a civil partnership.
Going through the financial settlement can be an especially upsetting and confusing time and pensions are often overlooked because the benefits are not immediate. However, it’s important to decide how you want to deal with your pension as it may be one of your most valuable assets after the family home.
At Rowlinsons, our expert family law solicitors have many years of experience supporting divorcing couples throughout the North-west and Cheshire. We’ll guide you through your options so you can choose the best way to sort out your pension arrangements.
Not only are we qualified to consult on divorce and the related financial matters of separation, but we also have specialist training and accreditations in non-court alternative resolution, such as family mediation and collaborative law processes. We’ll take you through each option, including funding and fixed fee family law services, and explain the process involved so you can choose the service that’s right for you.
Get the professionals you can trust. Recognition of our expertise in Family Law is shown by our membership in the Law Society’s Family Law accreditation scheme. We are also part of the Resolution, which highlights our commitment to resolving disputes amicably, and the Resolution Accreditation scheme which evidences our skills and expertise in complex family law cases.
Get in touch today to find out how we can help you navigate Pension aspects of a financial settlement in divorce.
Pensions are included as part of the financial settlement in the termination of a marriage or civil partnership and the court will consider both spouses’ pensions. In England and Wales, the total value of the pensions will be taken into account. This can include funds that were accrued before you were married and after the separation.
The court has the authority to offset the value of your pension against other assets or to order the sharing of a pension between spouses. In some situations, pension attachment orders are made, although these are rarer these days.
The main ways of dealing with pensions are as follows:
The value of the pension is offset by the value of other assets. This might mean that if you want to keep the family home you can, but it’ll be at the expense of receiving your ex-spouse’s pension benefits. That’s why it’s essential to get an accurate valuation of all assets included in the settlement.
It’s also important to think about the future, and how you will support yourself financially if you don’t take a share of a pension asset. Pension offsetting allows for a clean break once the financial consent order is finalised. This means your ex-spouse can no longer make a claim on your pension value or payments.
It may be that you don’t have enough assets to offset the pension’s value. In this case, you may instead opt for a pension sharing arrangement.
Pension sharing on divorce, the newer procedure of the three, is when one spouse receives a portion of the other’s pension benefit. The pension pot is split so that one person receives the pension credit, debited from the other’s funds. The person receiving the credit can in some cases transfer the amount to a different pension scheme (external transfer), but this depends on the pension scheme and the shared amount may simply be transferred to a separate pot within the same scheme (internal transfer). Not all pension schemes are equal.
Whether it’s an internal or external transfer, it may make a difference to the income you receive in retirement. Therefore, it is often prudent to take independent financial advice as well.
Pension sharing allows for a clean financial break. Once the pot is shared, each person is responsible for their own portion and will know at the time of divorce how much that is. Re-marriage or death won’t affect either party’s pension benefits.
Also known as ‘earmarking.’ In this option, a portion or all of the member’s pension is diverted to the ex-spouse or civil partner when the pension is due to be paid. The ex-partner in receipt of the benefit is subject to conditions such as losing their entitlement to the payment if they remarry, or their ex-spouse dies.
Earmarking does not give the receiving partner any control over how the pension is managed and they will be taxed at the rate of the person who owns the pension which means they could be paying more than their tax rate. It is also at risk if the ex-spouse is declared bankrupt in the future. Because of these limitations and the fact that they do not allow for a clean break financially, pension attachment orders are relatively rare.
Your situation is unique and while there are many complexities in dealing with pensions during a divorce there are steps you can take to ensure that you deal with your pension most effectively.
You might think your pension won’t be included if the marriage lasted a short time, your pension started before you got married, or it’s tied up in a family business. In these circumstances, the court will still include the pension in the financial settlement in England and Wales.
If you or your spouse have a small, self-administered scheme (SSAS) where the pension is part of the family business, the assets in the pension fund will be valued as a whole to identify the value of the specific portion you hold as a member. It may seem quite complex, but when you break it down the percentage you hold in the family business pension scheme will be treated like any other pension and pension sharing or offsetting options can be explored. It is vital to seek advice from both legal professionals and financial advisers.
For older divorcing couples, one partner may already be past retirement age, and drawing their pension income. You can still make a sharing order, however the one receiving it might have to wait until they reach a specific age.
If the retired spouse is receiving the old basic State Pension or new State Pension, the other spouse may be entitled to a tax-free lump sum of any of the retired spouse’s private pension funds.
International divorces can be more complex because of the conflict of different legal jurisdictions. Enforcing a pension sharing order, or any other pension arrangement following a divorce or dissolution, requires a high level of legal expertise in the field.
A pension attachment order is generally considered by the court, as it is up to the overseas pension provider to implement a sharing order. However, the English courts have limited power over foreign jurisdiction, and may prefer directing the pension holder to transfer the pension to an English one. In cases where this is not an option, they will likely implement a pension offsetting arrangement against the value.
Pensions can be complicated. That’s why taking expert legal and financial advice when going through a financial settlement is essential.
At Rowlinsons we understand the delicate nature of dealing with finances in divorce. We want to help you make good financial decisions so you get the best outcome for you. We do this through our commitment to a non-confrontational and collaborative process where the current and future needs of both parties are considered. You get expert advice that equips you to take the right action to secure your financial future so you can confidently begin your new life after divorce.
Unless there is a consent order or court order in place confirming settlement of all marital assets, either party to a divorce or dissolution of a civil partnership can stake a claim to their former spouse or partners’ pension decades down the line.
Divorce or dissolution of a civil partnership does not, of itself, cut the financial ties between two people. When considering a financial settlement, it is absolutely crucial that a court-approved order is put in place at the time, including how any available pension pot is to be divided. In many cases, after the family home, pensions held by either party are likely to represent one of the most valuable marital assets.
For more information on pensions, or to speak to our expert family lawyers, please telephone Rowlinsons Solicitors on and ask to speak with the family department.
Once your marital assets have been properly assessed, including any pensions, there are several different ways to split a pension pot following divorce or dissolution of a civil partnership, including what’s known as pension sharing.
Pension sharing allows one party to take a percentage share of their former spouse or partner’s pension pot. Alternatively, an order may be made for a pension attachment order where part of a pension is paid directly to the other person when the pension holder becomes eligible to draw this.
It may also be an option to offset the value of a pension against other assets, for example, one party keeps their pension in full while their former spouse or civil partner is perhaps awarded a larger share of the family home.
For more information on pensions, or to speak to our expert family lawyers, please telephone Rowlinsons Solicitors and ask to speak with the family department.
To avoid problems over pensions arising in the future, you should always try to agree with your ex-spouse or civil partner how any pensions and other valuable assets are to be split. Having reached an agreement with your ex, you will then need to instruct your solicitor to draw up a consent order to be approved by the court. This will legalise, and ultimately finalise, your financial settlement, such that neither party can make any further claims in the future.
In this way, your financial ties will be severed for good, and your pension and any other remaining assets, or what you are still entitled to under the terms of any agreement, will be protected. Needless to say, if agreement cannot be reached you should seek expert legal advice, or risk your pension being unprotected in years to come.
For more information on how to protect your pension in a divorce, or to speak to our expert family lawyers, please telephone Rowlinsons Solicitors and ask to speak with the family department.
Once a Pension Sharing Order has taken effect and the pension provider has received all the information and documents it needs, together with any required implementation fee, the provider will generally have up to four months to implement the pension share.
The process can take longer if information or documentation is outstanding, so it is important to deal promptly with requests from the pension scheme following the court order.
A pension provider may charge a fee for implementing a Pension Sharing Order. The amount varies between pension schemes and can depend on the type of pension and how the pension credit is dealt with.
It is therefore important to establish any implementation charges when considering the overall pension arrangements. Your solicitor can also ensure that responsibility for relevant charges is addressed as part of the financial settlement.
The rules for the State Pension are different from those applying to most occupational and private pensions. The new State Pension itself cannot generally be shared through a Pension Sharing Order, although certain Additional State Pension rights or a protected payment may be capable of being shared depending on the circumstances.
Because the rules depend on the type of State Pension entitlement involved, it may be necessary to obtain a State Pension valuation as part of the financial disclosure process.
Making the order is not the final administrative step. Once the Pension Sharing Order has taken effect, the relevant documentation must be provided to the pension scheme so that it can implement the division.
The pension scheme will then apply a pension debit to the pension holder’s benefits and create the corresponding pension credit for their former spouse or civil partner. Depending on the rules of the particular scheme, the pension credit may remain within that scheme or need to be transferred to another suitable pension arrangement.
It is sensible to review any expression of wish or beneficiary nomination you have made to your pension provider following a divorce or dissolution of a civil partnership.
These nominations can influence who the pension scheme trustees consider when deciding how certain death benefits should be paid. Divorce does not necessarily mean that every nomination you previously made will automatically reflect your new wishes, so you should check the position directly with your pension provider and update your instructions where appropriate.
Rowlinsons Solicitors can help you reach the best outcome and protect your financial interests in a divorce or separation. Our specialists are accredited members of the Law Society’s Family Law panel. Our team is approachable, friendly and professional.
We always aim to achieve amicable resolutions swiftly. However, when litigation is necessary, we have the experience and know-how to deal with the courts effectively
By choosing Rowlinsons for advice regarding pensions sharing and evaluation, you are assured of having the best legal expertise from expert Financial Settlement Solicitors. We are committed to providing exceptional levels of client care and will work closely and considerately with you to help find the best outcomes.
With expert Family Law & Divorce Solicitors based in our Sutton Weaver and Frodsham offices, we are recognised as one of the leading teams of Divorce Solicitors in Cheshire. We regularly help clients throughout the Northwest region including St Helens, Chester, Warrington, Widnes, Northwich, Wrexham, and across North Wales. We are able to act for clients right across England and Wales, so talk to our team today.
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