Pensions are often one of the largest assets in divorce after the family home, so it’s normal to be concerned about how your pension will be divided after a breakdown of your marriage or civil partnership.
It’s common for one person to have a larger pension than the other, so it’s important that your pensions are divided fairly so you can both feel financially secure for the future.
There are several Court Orders you can get to make sure you get a clean break now and won’t have to revisit your divorce finances years down the line.
Our Family Law and Divorce Solicitors can talk you through your options and advise you based on your circumstances. Whether you’re worried about having a smaller pension than your former partner or sharing your pension after divorce, we can help you.
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What Happens to Pensions in Divorce?
When you get married, your pensions become matrimonial assets which means when you divorce your pensions should be divided fairly between you alongside your other assets.
There are several ways that your pensions can be dealt with in divorce, including:
- Pension Offsetting - If one of you has a larger pension than the other and wants to keep the entire sum, pension offsetting is the process where the other then takes more of the other marital assets to level out the value. Offsetting does not involve the Court making any Pension Orders and your pension pot will remain in your sole names and of the same value. This is often used when one person wishes to keep the family home at the expense of sharing the future pension pot. It is also an option where the pension rights cannot be shared, for example with an overseas pension or if you’re both young, your marriage or civil partnership was short or the pension funds are comparatively small.
- Pension Sharing - Pension Sharing is where one person receives a percentage of the other’s pension, and this percentage is transferred into your name. This gives you each separate pension fund that can be invested in the same scheme or in another external scheme (subject to the relevant scheme rules). Pension Sharing involves applying to the Court for a Pension Sharing Order, and means you can take your pensions at different times. This is often the fairest and most used option, especially when divorcing later in life or if there is a large gap in your pensions. Pension sharing gives you a clean financial break.
- Deferred Pension Sharing - A Deferred Pension Sharing Order means that the pension is shared later. If the pension is already in payment to one of you, the younger of you will receive your share when you reach retirement age.
- Pension Attachment - A Pension Attachment Order means that when one of you retires the other will receive a lump sum payment and/or an income stream from the other person’s pension.This does not achieve a clean break because you will only be able to receive your share when the other person retires, not when you choose to retire, so in this way you attach to the existing pension arrangement. This option is less common.
You might need to instruct a Pension Actuary to advise you on the financial impact of any agreements and look at equalisation of pension income on retirement.
Splitting the pension 50/50 won’t always mean you’ll get an equal pension income when you retire.
This can be because of your respective ages and life expectancies as well as other things.
It’s also important to remember that an equal split of assets is not always a fair one.
How We Can Help
We work with a number of Pension Actuaries and will ask financial experts to consider any tax or annual allowances that need to be considered when you retire.
When it comes to pensions, what you’re entitled to will change over the course of your lifetime, which is why knowing how to divide them in divorce can be complicated. But when it comes to something as valuable as your pension, it’s really important that you get the right legal and financial advice.
With over 170 years of experience, you’re in safe hands with Simpson Millar.
Our Family Law Solicitors can help you decide which option works best for you when it comes to dividing your pensions based on your unique circumstances. We will always tailor our advice to you on a personal level, while offering a professional expert service.
You can also choose from various options for appointments, including telephone and video calls - whatever suits you best.
Don’t just take our word for it…
Here are some helpful articles on Pensions in Divorce:
Divorce in Later Life: How to Divide Your Pensions
When sorting out pensions you have a number of options that you should think about carefully, as your pension might be your biggest asset in later life divorce.Read more
How to Protect your Pension in Divorce
A Pension Sharing Order will make anything you and your former partner agree about your pensions legally binding.Read more
Pension Sharing Orders in Divorce Explained
A Pension Sharing Order is a legal way to divide up a pension between you and your ex in a divorce or dissolution of their civil partnership.Read more
How Much of My Partner’s Pension am I Entitled to when we Divorce?
Pensions are treated like any other martial asset in divorce, so your pensions should be divided between you and your partner alongside your other assets.Read more
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