Pensions & Divorce

It is important to remember that the final order within divorce proceedings (previously decree absolute) does not terminate a spouse’s claim for financial provision. If you are divorcing, you will also need to deal with the financial aspects whether this be by agreement with your spouse, by mediation, negotiations through solicitors or within court proceedings.  It is important that once you have reached an agreement that this is drawn up into a legally binding financial court order to formally dismiss any future legal claims.

What assets are considered within divorce proceedings?

Depending on whether the assets are considered matrimonial or non-matrimonial will depend on how they are considered by the court. Matrimonial assets are those which have been acquired during the marriage and usually include things such as the matrimonial home, pensions and savings.

Non-matrimonial assets can be asked to be excluded from the financial settlement, however, this is not always the case especially if the matrimonial assets on their own do not sufficiently meet the needs of both parties or any children of the marriage.

How are assets divided?

There is no exact answer as to how assets will be divided as every case is different, however, the general starting point will be one of equality, although a range of different factors including the parties needs, length of marriage and age of the parties will be taken into consideration and there may be good reason to depart from equality.

Pensions why are they important?

Pensions can often be the most valuable asset which needs to be considered.  They can also be complex assets as they are volatile investments moving with trends in stock markets. 

Consideration should be given to the type of pension.  There are two main types of pensions, defined contributions and defined benefits. Defined contributions are the most common type and are linked to the employment whereby a contribution is made by you from your salary and your employer also contributes or you can voluntarily pay into a private pension. A defined benefit pension is usually a workplace pension based on your salary and length of service.  Certain types of employment including teachers, police and army have defined benefit pension schemes.

No matter the type of pension, it will be given a cash equivalent transfer value.  This is the capital value placed on that pension if you were to transfer your pension from your current provider and purchase another pension available on the market at that time.  It is important that along with the disclosure of finances, that cash equivalent transfer values for all pensions are provided.

State pensions may also be considered especially if you or your spouse are near retirement age.  Although these cannot be shared, it may be considered by sharing more of a private pension to the spouse with less state pension contributions.

How are pensions considered?

Pensions can have both an income and capital value.  As will other assets, the starting point for pensions is one whereby the pension should be share equally, although as above, there may be reasons to depart from equality such as consideration given to when the pension was accumulated.  Pensions can be taken into account by a pension share order, attachment order or by offsetting. 

What is a pension sharing order?

Pension sharing divides the pension at the time of the divorce by transferring part or all of a pension from one spouse to another.  Often sharing the capital value of the pension equally will not provide an equal income for both parties on retirement as this will depend on the parties needs and ages.  As solicitors we are not pension experts and we would usually advise (depending on the type of pension and value of the pension) to obtain a pension report from an actuary who can advise on how much income a spouse will receive depending on how the pensions are shared.

To share a pension there will need to be a court order, whether this is made within proceedings or drafted by a solicitor and lodged at court with the consent of both parties to be approved by the court.  Once the financial order has been approved by the court this must be served together with the final divorce order on the pension provider for it to be implemented.  It is important however, to wait 28 days before applying for the final divorce order once the financial order has been approved as the pension share order does not take effect until 28 days after the order has been made. 

What is offsetting?

Sometimes a spouse may decide that it is more important for them to retain the matrimonial home, for example if there are young children.  If this is the case, it is still important that the pensions are considered as consideration for some of the value of the pension can be offset against the other assets which are available.

What is an attachment order?

An attachment order allows the non-pension spouse to receive an income and/or lump sum from the pension in the future. These are however non-favorable as you will have to wait for your ex-spouse to drawdown on the pension to receive it, you will have no control over how much your ex-spouse will continue to contribute to the pension.

How can Pinney Talfourd help

If you have any questions relating to divorce, pensions or financial settlements then please get in touch and our specialist family team will be able to assist you.