What happens with pensions?
You may be entitled to a share of your spouse's pension or they could be entitled to a share of your pension. There are three alternative ways in which the court can treat pension rights:
Pension Sharing Orders
When a pension sharing order is made, pension benefits are divided between the couple at the time of divorce and a legal transfer of ownership of benefits is made from the pension scheme member to the ex-spouse.
Sharing may be favoured where:
- it is preferred to the division of other assets
- the ex-spouse has no pension rights of his or her own and is unlikely to be able to build up pension rights after the divorce
- the CETV is relatively significant and can justify the cost of the sharing arrangements
- the ex-spouse has more need of retirement income and property rights
- pension rights form a substantial element of the family wealth
- there are no assets against which pension rights can be offset
A pension sharing order specifies what proportion of the benefits is to be transferred. This will be expressed as a percentage of the cash equivalent transfer value. The pension then becomes subject to a debit of the appropriate amount and the beneficiary becomes entitled to a corresponding credit.
The pension debit will reduce the member's rights under the pension scheme by the percentage shown in the pension sharing order. The benefits will be those accumulated up to the transfer day. All benefits accumulated after the transfer date will not be affected.
This is where the value of the pension is off-set against other matrimonial assets. For instance a husband may prefer to keep his pension and a wife may prefer to keep the matrimonial home.
Offsetting may be favoured where:
- the CETV is so small that it is not worth considering attachment or sharing
- each partner has equal or sufficient pension rights of their own and it is unnecessary and costly to opt for attachment or sharing
- the priority for a wife and young children is to secure the matrimonial home
- the parties are young and have good prospects of building up pension benefits in their own right after the divorce
Pension Attachment Orders (previously 'earmarking')
Attachment orders are a direction by the court to the pension trustees to pay part or all of the members pension benefit to the ex-spouse on retirement or death. An attachment order does not transfer legal ownership or control of the benefits from a pension member to the ex-spouse.
Pension Attachment orders are a form of deferred spousal maintenance and therefore payments would cease on the remarriage of the recipient ex-spouse. They would also cease on the death of the pension scheme member.
Whilst unusual, attachment may be favoured in the following circumstances:
- where the need is to continue to provide lump sum life cover, perhaps for an ex-wife with young children or in the case of an older couple, close to retirement
- where the need is for a tax-free lump sum to be paid to the ex-spouse on the member's retirement.
- where the attachment order is to be used as a way of providing maintenance in retirement without ownership being transferred
- where the pension provider recognises the spouse as a financial dependant for the payment of spouse's pension.
Can we deal with pensions ourselves?
Dealing with pensions is a very complex area and it is always best to get advice from a family lawyer to see whether or not you have any claims against your ex-partner’s pension or if they could have claims against your pension. Even if you reach an agreement regarding pensions, you should still see one of our experienced lawyers who will ensure that your interests are protected by placing the agreement into a consent order. If there is to a pension sharing order then a consent order will be necessary as the pension company will not transfer the pension benefits without a sealed court order. If an agreement cannot be reached then we can assist you to make an application to court in respect of your pension claims.
For more information please contact us online or by phone on 01252 733770.