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Divorce and Pensions - what do I need to think about?

Jan 29th, 2021

Amy Chapman, Solicitor

Should I just ignore pensions on divorce?

The short answer is “no”.  If you ignore pensions, you could end up with an unfair outcome for you or your spouse.  Some people do not like the idea of pensions as they find them complicated (which they are).  Some people also do not feel that they are “entitled” to any of their spouse’s pension as they have not been the one paying into it.  This is not, however, how the law works.

Why do I need to consider pensions?

Pensions can often be one of the largest assets, if not the largest asset, in a case.  They are “matrimonial” even though they are in the name of one party or the other.  It is therefore important that they are considered appropriately within the context of the case as a whole and not simply left to one side.

Pensions provide benefits on retirement which can include income and/or a lump sum.  It is what you use to live off when retired and are no longer working.  When going through a divorce, it is important to consider your future circumstances and not just the here and now.

So, what can potentially happen to pensions on divorce?

A Court has the power to make a Pension Sharing Order, a Pension Attachment Order or pensions can also be “offset” against other available assets.

If it was appropriate for there to be a Pension Sharing Order in your favour, that would involve part of your spouse’s pension being transferred to you.  You would then have your own pension.

Pension Attachment Orders are very rare these days.  If it was felt appropriate for there to be a Pension Attachment Order in your favour, it would involve a percentage of your spouse’s pension being paid out to you in line with the income your spouse receives from their pension and also potentially any lump sum they receive.  However, in these circumstances, you would not have a pension in your own right and the payments would end if your spouse dies or if you remarry.  Pension Attachment Orders are also capable of being varied or changed by a subsequent Court Order so there is less certainty.  None of these downsides apply to Pension Sharing Orders which is why they tend to be the preferred option.

One example of pension offsetting could be that you would keep the family home and in return your spouse retains their pension in its entirety.  If this option is to be explored then it is necessary to be very careful as pensions are not worth the same pound for pound as equity in a property.

What will I need to do if my case involves pensions?

If there are pensions in your case, you will likely be asked to obtain a cash equivalent value in respect of each and every one of them.  Your spouse will also be asked to do the same.  Whilst this can give some idea as to the value of the pensions, it often does not provide the full picture.  There are different types of pensions which require different considerations.  In cases involving pensions it is quite common to refer to a Pensions on Divorce Expert (PODE), also known as an Actuary or a Pension Advisor.  They are often requested to provide a report and carry out certain calculations as to how the pensions should be split or potentially offset.  In many cases, without that expert advice, it is incredibly difficult to know what would be a fair outcome in terms of pensions.

How can Langleys help me?

We are able to guide you through this process and help you explore the options in relation to any pensions in your case.  We will tell you if we consider it appropriate and worthwhile to instruct a PODE.  Upon receipt of any expert advice, we can apply that to your situation and advise you what level of financial settlement would be appropriate for you, encompassing all assets, not just pensions.

If you or a family member want to have a confidential discussion concerning your situation, please contact us.

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