Consumer organisation Which? found that 71% of divorcing couples do not divide pensions as part of a divorce settlement.
A freedom of information request by a law firm Nockolds found that the number of applications for a Pension Sharing Order had fallen by 35% since 2017 over a 5 year period from 36,202 applications to 23,622 applications.
Divorcing couples may overlook pensions for various reasons. Complexity is one factor, but another may stem from the rising trend of couples opting for divorce proceedings without legal representation, especially with the advent of ‘no-fault divorce’ regulations.
Pensions in Divorce
Dividing pensions ranks amongst the most significant and intricate tasks in divorce matters. In our role as Family Lawyers, we frequently encounter situations where one partner possesses a substantially larger pension fund, or instances where one partner lacks any pension provision entirely. There’s a prevalent misunderstanding that pensions should not factor into financial settlements.
This issue raises significant concerns, especially among individuals, predominantly women, who overlook the importance of including pensions in divorce settlements. Neglecting to properly divide or offset pensions can result in a loss of future income and financial stability. It’s crucial to recognise that all pensions, whether accrued before, during, or after the marriage, are considered in this process. This encompasses various pension types such as occupational schemes, public sector pensions, self-invested personal pensions, and small self-administered schemes. Complex debates often arise regarding the potential ringfencing of pensions accumulated during specific periods, such as before the marriage.
Pensions Sharing Orders and Offsetting
Since 2000, Courts have had the authority to issue Pension Sharing Orders, facilitating the transfer of a portion of one spouse’s pension fund to the other. Such an order can be obtained through mutual agreement if both spouses consent. This consensus may be reached with the aid of solicitors, mediation, or collaborative lawyers. Alternatively, during contested financial remedy proceedings, the Court can intervene to establish such an order. Regardless of the method employed to reach an agreement, it’s crucial to have a solicitor draft a Consent Order accompanied by a Pension Annex, which outlines the portion to be transferred from the pension.
Offsetting, while an alternative to Pension Sharing Orders, is typically less favourable. It allows one party to retain their entire pension while the other receives a greater portion of other matrimonial assets to compensate. However, pensions often possess numerous hidden benefits, which is why offsetting is generally less preferred
Pension Actuary advice
Pension assets are complex to unpick and often require expert guidance from a Pension Actuary to ensure that fairness and equality is achieved in any pension share or offsetting arrangement. While state pensions cannot be divided, the income derived from a state pension can be considered when assessing the future earnings a state pension could generate. This is something a pension actuary is able to address.
If you are considering divorce or are already in the process, and whether you have a pension or not, it is crucial to seek legal advice.
If you require any advice on this topic or assistance with any other family-related matters, please contact Family Solicitor Ellie Straughan at els@swinburnemaddison.co.uk, or telephone our team on 0191 743 3990.
This article is for general information only. It does not and is not intended to constitute legal or professional advice. The law may have changed since this article was published and we would always recommend that you seek specific advice on any legal issue.
