What Are The Options For Dealing With Pensions In A Divorce? – Divorce

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In many divorce cases, the two largest assets are the
family home and the parties’ pensions. Pension funds are a
shareable asset which can be divided between you and your spouse in
the event of divorce. Hannah Pike, a solicitor in Harrison
Drury’s divorce and family law team, looks at the options for
dealing with pensions.

Pension sharing in a divorce settlement can sometimes be a
difficult issue to resolve, therefore it is recommended that you
seek legal advice on your entitlement to your spouse’s
pension.

There are two main types of pension schemes: defined benefit and
defined contribution. A defined benefit pension pays you income in
retirement based on your salary and your length of service, whereas
a defined contribution pension is a fund that you contribute into
throughout your working life, often with your employer matching
your contributions and those funds are invested on your behalf.

How is the value of a pension calculated?

The starting point is to request the Cash Equivalent Transfer
Value (CETV) for all pensions directly from the pension provider.
This figure represents the capital value of the pension on the date
the CETV was issued. All pension providers will calculate transfer
values differently and there is no ‘one size fits all’
approach. CETVs of defined benefit pensions, can be undervalued in
terms of the benefits they provide upon retirement, compared to
defined contribution CETVs.

How are pensions divided?

Pensions can be shared between parties on divorce just like any
other assets such as the family home or savings. The court has the
power to make any order that it feels is appropriate in the
circumstances, with the main aim of achieving a fair outcome for
both parties.

Some orders the court may make are as follows:

  • A pension sharing order – This is
    the most common approach. A percentage of one spouse’s pension
    funds is transferred into a pension fund in the other spouse’s
    name.

  • A pension attachment order
     Whereas a pension sharing order divides up
    the parties’ pension provision at the time of divorce, a
    pension attachment order redirects part or all of one spouse’s
    pension funds to the former spouse when it comes to be paid.

  • Pension offsetting – This is where
    the pension holder retains their pension in full and the other
    spouse would retain a greater value of other joint assets, such as
    the family home.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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