When a couple divorce, decisions over pensions can be particularly problematic. Regardless of whether they were accumulated before or after the marriage, pensions form part of the assets which usually need to be divided to ensure a fair settlement is reached for each party.
A pension could be one of the most valuable assets of a marriage, so it is imperative that they are allotted fairly between the parties on divorce. Nick Dudman, a family law solicitor at Rundlewalker in Exeter explains how this is achieved.
Since the landmark case of White v White (2000), the starting point for any court when deciding on a financial settlement on divorce, assuming basic “needs” are met, is a 50/50 split. However, this will be decided on a case-by-case basis and the court will come to a decision on pension allocation having considered all the marital assets, the finances of each party and the required retirement benefits.
For example, if the divorcing couple agree to take an equal income from the pension the wife may receive a larger share of the pot, as women are more likely to live longer. Or, if the couple are young, only briefly married or the pension pot is negligible, the court may decline to divide the pension at all.
Most pensions can be shared, but a state pension cannot. However, if there is going to be a hefty imbalance between the state pension that each spouse will receive, the spouse in the weaker financial position may be allocated a larger share of a private pension or other matrimonial assets to compensate for the difference.
Although assets such as the marital home can be transferred to one spouse without going to court, decisions over retirement benefits must be approved by a judge as the pension provider cannot divide a pension arrangement without a court direction. This is usually achieved by a pension sharing order.
A pension sharing order requires the pension provider to transfer a percentage of the pension pot from one spouse into a pension scheme in the other spouse’s name. It is a legally binding agreement which is implemented by a financial court order.
There are two alternatives to a pension sharing order:
Pension sharing orders are designed to allow couples to make a clean break, so it makes no difference to the allocation if one spouse later remarries or dies. Once a pension sharing order has been made it cannot be changed, so it is imperative that the value of the pension is correctly calculated before the order is made. This is usually carried out by an independent financial adviser who specialises in pensions.
A pension sharing order can only be effected after the ‘final order’ or ‘decree absolute’ is granted. After this the pension provider has four months to execute the transfer beginning on the day the order takes effect. On receiving the pension sharing order, the pension provider must also, within three weeks, provide both spouses with information about the charges the pension transfer will incur and when it will be implemented.
How a solicitor can help
Although all pension division agreements have to be approved by the court, an expert pensions solicitor can negotiate with your former spouse to reach a fair agreement which will usually just need to be approved by the court, thus saving you both the time and money it would take for the court to come to a decision.
They will talk you through the various options to find one that is right for your situation, help ensure the pension pot is properly valued, complete all the necessary paperwork and offer advice and representation when your case has to go to court.
Call Nick Dudman on 01392 209210 or email firstname.lastname@example.org at Rundlewalker in Exeter.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.