What Happens To My Pension If We Divorce?

There are so many things to consider when thinking about separation and divorce that it may seem overwhelming. But amid the stress of a relationship breakdown, it’s really important not to overlook pension assets. There are numerous financial aspects involved in the divorce process that inevitably have to be worked through - pensions are a key consideration, and need to be included in your financial settlement.

Here at Vines Legal, we make a fair pension agreement a priority for our clients. With that in mind, we’ve put together a summary of the key points to consider when it comes to minimising the financial impact your divorce will have on your retirement.

The Value of Your Pension

The first thing to do is establish the value of your pension. We will approach the provider, or providers if you have more than one, and request that they supply the value of your pension. This is commonly known as the ‘cash equivalent value’. For those with a ‘defined benefit’ pension, or final salary scheme, the value will depend on how many years you have worked, and your salary.

How can Pensions be Split on Divorce?

There are three main options when it comes to dealing with pensions in a divorce.

1. Pension Sharing

One option is known as pension sharing, where one spouse obtains a share by court order, of their ex-spouse’s pension. This is calculated with reference to a number of factors.  The agreed share is then debited from one party’s pension pot and credited to the other.

Pension sharing is a popular course of action as it allows for a clean break, but it is advisable to seek legal advice on this course of action as it can be a more complicated process depending on individual circumstances and the ages of the parties.

2. Offsetting

Another option is offsetting. By offsetting a pension, the funds can be offset against other assets, commonly property. Again, an accurate pension valuation is really important to make sure that the agreement is fair.  Specialist legal advice is recommended.

3. Attachment or Earmarking

The final option is commonly referred to as pension attachment or earmarking. This course of action obligates the pension provider of one spouse to pay the other spouse a certain percentage of the monthly pension payment, and/or cash lump sum, that would pay out on retirement.

If you are considering a separation or divorce, it’s really important that you know your rights when it comes to splitting your assets in order to minimise the financial impact that your divorce will have on your retirement. As you can see, the options are complex, and it is, therefore, advisable to seek expert legal and financial advice. This is particularly important where there may be more than one pension involved, or if the fund is large.

Vines Legal are experts in ensuring our clients receive their fair share of pensions during a divorce settlement. If you are considering a separation or divorce, please do contact us on 01246 555610 for a free initial consultation.