Aside from property, the most valuable assets in a divorce are usually pensions. It is not uncommon for one spouse to have a significantly larger pension than the other, particularly where one spouse has stayed at home to look after the children.
Private pensions, occupational pensions and additional state pensions can all be shared in a divorce but the extent to which they are shared will depend on the circumstances of each case.
Once a divorce is underway, each spouse will have to provide full disclosure of their financial resources, including pensions. The value of each pension will be considered alongside the value of all other assets, including the family home.
Consideration will be given to the financial resources and needs of each spouse (both now and in the foreseeable future). Also, to when the pensions were accrued (i.e. before, during or after the marriage) and whether there are any grounds to ring-fence them.
In cases where pension sharing is appropriate, the following approaches are taken:
- Pension Sharing Orders – This is where one spouse receives a share of the other spouse’s pension at the point of divorce. Their share is transferred out of the existing scheme into in a new scheme of their choosing. This achieves a clean break at the point of divorce and gives the receiving spouse their own pension fund.
- Pension Attachment Orders – This is where some or all of the pension benefits are re-directed to the receiving spouse when the pension holder is able to receive them. This keeps the pension fund intact but fails to achieve a clean break. There are also a number of risks associated with this approach for the receiving spouse and so it is rarely used.
- Offsetting – This is where the value of the pension is offset against the value of other assets, such as the family home. This has the benefit of keeping the pension fund intact but at the expense of receiving a lesser share of other assets.
It is important to get advice at an early stage, particularly in the case of defined benefit schemes such as public sector and/or final salary schemes.
Stuart Duncan is a specialist Divorce and Family Solicitor at Rowberry Morris, based at our Tadley office. If you have any questions about divorce or separation, please contact Stuart on 0118 982 3774 or stuart.duncan@rowberrymorris.co.uk.