Pension Sharing – how does it work and how long does it take?

When a marriage ends, dividing financial assets is often one of the most complex and contentious aspects of the process. Among these assets, pensions frequently hold significant value and require careful consideration. Pension sharing orders are a common mechanism to ensure a fair distribution of pension assets between separating partners. But how does this process work, and what timescales are involved? This blog unpacks the essentials.

What Is Pension Sharing?

Pension sharing is a legal process that allows the value of a pension to be divided between divorcing partners. This ensures that both parties have access to pension benefits when they retire. A pension sharing order creates a legal entitlement for one spouse or civil partner (the “recipient”) to receive a specified percentage of the other party’s pension (the “member’s”) fund.

How Are Pensions Divided?

Pension sharing requires a detailed assessment of all pensions held by both parties. These could include:

• Workplace pensions
• Personal pensions
• State pensions (although the basic State Pension cannot be shared, additional State Pension may be)

Once the total value of pension assets is determined, the court decides how they should be divided, unless the parties can agree between them. A pension actuary or financial adviser is often involved to provide expert guidance on achieving a fair division.

The Process of Pension Sharing

1. Financial Disclosure: Both parties must fully disclose their financial assets, including all pensions.
2. Valuation: Pension providers supply a Cash Equivalent Value (CEV) for each pension. This figure represents the current value of the pension for division purposes.
3. Negotiation or Court Decision: Pension sharing percentages are agreed upon either through negotiation or by a court order if agreement cannot be reached.
4. Pension Sharing Order: Once an agreement is reached, the court issues a pension sharing order, which specifies the percentage to be transferred.
5. Implementation by Pension Provider: The pension provider carries out the transfer, either creating a new pension in the recipient’s name or transferring the value to an existing pension scheme.

Timescales Involved

While the pension sharing process varies depending on individual circumstances, typical timescales include:

1. Financial Disclosure and Negotiation: This stage can take several weeks to months, depending on the complexity of assets and the willingness of both parties to cooperate.
2. Court Proceedings: If an agreement cannot be reached amicably, court involvement may extend this phase to several months.
3. Issuing the Pension Sharing Order: Once the court grants the order, it usually becomes effective upon the granting of the final divorce decree (Decree Absolute) or final dissolution order.
4. Implementation Period: After receiving the court order, pension providers have up to four months to implement the transfer. This statutory timescale allows providers sufficient time to process the division.

Challenges and Delays

Despite the established framework, delays can occur due to:

• Incomplete financial disclosure
• Disputes over valuation or division percentages
• Administrative backlogs at pension providers
• Complexity in transferring pensions across different schemes

Key Considerations for a Smooth Process

• Seek Expert Advice: Engage a solicitor experienced in family law and financial remedies, as well as a financial adviser for pension valuation and planning.
• Communicate Promptly: Ensure timely responses to requests for information or documentation.
• Understand Costs: Be aware of fees associated with pension valuations and the implementation of pension sharing orders.

Conclusion

Pension sharing is a vital aspect of financial settlements in divorce cases, ensuring fair retirement provisions for both parties. However, the process requires careful planning and patience due to the timescales involved. By understanding the steps and potential challenges, and seeking appropriate legal and financial advice, you can navigate this complex process more effectively.

For further assistance with pension sharing or any other family law matter, our experienced team is here to help.

 Contact us today to discuss your circumstances and take the first step toward resolution.