Looking to the future – pensions in divorce

If you are going through a divorce or dissolution of a civil partnership dividing up any pensions you have will usually be one of the largest financial decisions you need to make. Although you may be looking at how you are going to finance yourself in the immediate future, after a divorce it is important to think about your retirement and your needs later in life.

Women particularly can lose out if they do not consider pensions during divorce as due to the gender pay gap, maternity leave and career breaks, women are disproportionately disadvantaged. Support of an ex-partner’s career during the marriage may enable their ex-partner to contribute more to their retirement fund. Whilst married this is not an issue as both will benefit on retirement but on divorce the inequality of pension provision will be evident and needs proper consideration.

Pensions are capital but are dealt with differently from savings or property as they can be difficult to quantify and not able to be accessed until later in life. A pension is often a person’s most valuable asset after property.

In England & Wales the total value of the pensions you’ve each built up is taken into account. This doesn’t only mean the pensions that you or your ex-partner built up when you were married or in a civil partnership, but all your pensions – except the basic State Pension.

Each divorce is different which means the treatment of pensions will be different from case to case, it also may depend on the type of pensions you both have and whether they are in payment.

Each of you will need to list the pensions you have which may be personal pension schemes (including stakeholder and self invested personal pensions) or schemes through work. If a pension is in payment it isn’t possible to take a lump sum from your ex-partner’s pension, this applies whether your ex-partner took a lump sum or not.

Each you will have to ask for a valuation of your pension, the cash equivalent transfer value (CETV). This is the amount you’d get if you moved your pension elsewhere. You get this valuation from your pension provider

The most common way of dealing with pensions on divorce is by a Pension Sharing Order which can only be made by the Court. This allows for the transfer of all or a percentage of one person’s pension to the other at the time of settlement.

To calculate the percentage of pension that will need to be transferred to achieve the desired outcome a Pensions on Divorce Expert can prepare a report for both you and your ex-partner. This may not be necessary if the parties are younger and the total value of the pensions are less than £100,000 but in all other cases it will be desirable, particularly if one of you has a public sector pension, uniformed service pension or other defined pension scheme as these pensions can carry additional benefits that may not be obvious from the CETV.

Pensions are a very complex but important area to consider on divorce and our team here at Battens are here to help you navigate through this.

For more information contact Lesley Powell on 01935 846089 or email lesley.powell@battens.co.uk