A recent study by Standard Life found that over 25% of people with a private pension do not know how pensions are dealt with upon divorce.
Furthermore, one in five divorcees expressed a wish that they had handled pensions differently during their divorce. The study found women were far more likely to feel this way, which is understandable, as factors including parenthood and childcare responsibilities generally mean that women are left with a smaller pension fund by the time they reach retirement.
From a divorce point of view, the Court’s expectation is for both spouses to be on an “equal footing” in retirement, which can be achieved in various ways including:-
Pension sharing
The pension is split at the time of the divorce, with a percentage of one spouse’s pension being transferred into a new or existing pension that belongs to the other spouse. This is a common choice, as it severs financial ties at the point of divorce and offers both spouses autonomy over their respective pension funds.
Pension attachment order
One spouse will agree to pay the other spouse some of their pension income on retirement. There are however some downsides if you are on the receiving end of a pension attachment order including that your spouse still has overall control of the pension, including investing it and when to start drawing money from it.
Offsetting
Your spouse, for example, may retain their entire pension in exchange for you receiving a larger percentage of the sale proceeds from the family home. You may then wish to invest the extra capital you receive into your own pension fund in preparation for retirement.
In some cases, pensions can be the largest asset, even surpassing the value of a family home. Also, the “cash equivalent value” of a pension provided by scheme during a divorce may not be a true reflection of its value. For those reasons, it is usually advisable to obtain a report and calculations from a pensions on divorce expert (PODE) as to a fair division of pensions. The PODE can be asked to take into account various factors including pensions accumulated during the marriage only, the state of health / life expectancy of both spouses and so on.
At E J Coombs, our team of solicitors are experienced in advising upon and dealing with orders for pensions upon divorce, to ensure your interests are protected in retirement. Please do not hesitate to contact us today, using the links below, if you would like to discuss your options further.
