What is a Pension Sharing Order?
Pensions will usually be dealt with by way of Pension Sharing Order which divides the value of your pension assets at the time of the divorce fairly between you, ensuring both parties’ needs are taken care of.
Understandably, divorcing couples often want to obtain a divorce and part ways immediately with the belief that sharing pensions will tie you both together until retirement age however a Pension Sharing Order provides you both with a clean break after divorce.
Pension Sharing Orders are the favoured and the most common way of dealing with pensions following divorce.
How are Pensions divided in a divorce?
The cash equivalent value of both spouse’s pension provision are added to the matrimonial pot. Once this has been provided, discussions of how it will be divided between you and your spouse can take place.
When you are negotiating a financial divorce settlement, which will be reflected in a final Financial Order, there are specific provisions in place when dealing with pensions; Pension Sharing Orders or a Pension Attachment Order.
How do Pension Attachment Orders work?
A Pension Attachment Order (this order may be made in a smaller minority of cases) is a type of maintenance order that is paid each time the pension arriving payment date is due or as a full payment from the spouses’ benefits and ends only upon the death of the former spouse.
This is an on-going link to your spouse.
Pensions are often one of the most valuable, if not the most valuable matrimonial asset in divorce
According to The Charity Law for Life: “Many divorcing couples leave out their pensions when they decide how to divide their money and property, particularly if they cannot afford a solicitor. But this can be a huge mistake”
A survey by Interactive Investor’s of over 12,000 people found less than half had discussed pensions on separating.
If pensions have been omitted from the divorce settlement this typically adversely affects women, especially older women, who are likely to have smaller pensions due to family and childcare commitments with historical gender pay gaps also contributing towards smaller pensions.
This can lead to an unfair outcome with significant negative affects in the future.
Men aged 45-54 average the pension wealth of £86,000 compared to women with £40,000.
Men aged 55-64 average pension wealth £185,000 and women the same age just £55,800.
Property or Pension?
The majority of divorcing couples are quick to accept the family home in a divorce settlement which is understandable however pension wealth should not be underestimated, they are a valuable asset that shouldn’t be overlooked.
How is a Pension valued?
As there are different types of pensions, it may be necessary to obtain an actuarial report so the pensions can be valued on a consistent basis that will result in a fair outcome for both of you in deciding how they are going to be dealt with.
Costs of such a report will be far outweighed by the benefits to be gained.
Can my wife claim my Pension before we were married?
Generally, the Courts decide on your case individually as there is not one formula for all cases. The two determining factors that have a significant impact on whether your wife or husband can claim on your pension comes down to:
- The length of the marriage – the longer the marriage, it is likely the non-matrimonial assets (pensions accrued before the marriage) will be added to the matrimonial assets.
- Value of pension – if the amount of pensions accrued before the marriage is substantial, it is possible this will be divided into non matrimonial assets (the portion accrued before the marriage) and matrimonial assets (the portion accrued during the marriage).
However each party’s needs are the most important issue and pre-marital accrual of pensions will be included in the overall calculation that is necessary to ensure needs are met.
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~ Birkett and Co Solicitors