Pensions on divorce
What you should know about pensions when divorcing or dissolving a civil partnership
In many cases, considering your pension situation isn’t the first thing on your mind when you’re going through a divorce or the dissolution of a civil partnership. You’ll be thinking about housing, your children and possibly, how you’ll manage as a single parent. However, making sure that arrangements are in place for the sharing or division of pensions held by both people in the relationship is important to consider properly and with legal advice as part of your divorce or dissolution process. This allows for future financial planning and a certain peace of mind. All of both parties’ pensions, including state pensions, can be taken into account when sorting out the finances after a relationship breaks down.
“My husband and I are divorcing. He says that I can take more out of the sale of the house than him, but that he’s keeping his pension. How are pensions dealt with in this situation and is he right?”
When a couple divorce or dissolve their civil partnership, their pensions can be dealt with in three ways: a Pensions Sharing Order (PSO) can be put in place. A percentage is taken from the person’s pension with the highest value and put into the other party’s pension so that usually, pension incomes are equalised. Secondly, there can be an offset arrangement whereby instead of taking a percentage of one pension to put into the other, monies are taken from elsewhere in the marriage or civil partnership, such as taking a higher percentage of the net sale proceeds of the family home. Finally, each person in the relationship can simply keep their own pension; this may be suitable if both pensions are relatively similar and low in value.
“How do I know what a fair split of the pensions would be?”
This is where the expert advice of a solicitor is invaluable. Your solicitor is not allowed to give financial advice; however, they can instruct the assistance of a Pensions on Divorce Expert (PoDE). Your solicitor will draft a carefully and specifically worded letter to a PoDE outlining the proposed division of the pension, how the split should be calculated and all relevant information.
The PoDE then produces a report with their recommendations, outlining how the pension should be divided by way of a PSO and/or offsetting arrangement. Your solicitor will use this report, alongside the other documents relating to the financial settlement, to negotiate the division of the pensions and to put the terms of the settlement into a Financial Remedy order (FRO). It is worth mentioning that your solicitor may well recommend that you take advice regarding your finances, including any pensions, from an independent Financial Advisor or IFA.
“My partner and I are splitting up after 20 years together. Do I have any claim on his pension when we’re not actually married?”
Unfortunately not. In this situation you would generally keep your own pension and would not be entitled to any of your partner’s pension.
“If my civil partnership breaks down, am I obliged to give my civil partner half of a pension that I paid into for years before I met them?”
Pensions that were accumulated before the civil partnership or marriage can indeed be taken into account when a relationship breaks down. Generally speaking, all pensions will need to be considered, including those built up before the parties met one another. In particular, public sector pensions (eg NHS, Police etc.) can be very valuable and dividing them up needs to be considered with care and expertise.
“Is it necessary to get all the instructions and information about what is happening about our pensions in writing?”
It is strongly advisable that whatever has been decided about your pensions is included in the FRO, which is the document that sets out the terms of your financial settlement. If you have agreed a PSO, further details about this will be included in a document attached to the FRO, called the Pension Sharing Annex. Without this important document, pension providers will not implement the PSO. Your solicitor will ensure that all the relevant paperwork is taken care of so that you can be confident that your pension arrangements are contained within your final settlement and implemented properly.
If you’d like advice on how to incorporate pension sharing or other financial considerations into a settlement following the breakdown of a relationship, please get in touch with one of our experts in the family team.
Sue Wardropper is a solicitor and Head of the Family Department at Barker Gotelee Solicitors in Ipswich.
Suffolk Family Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email firstname.lastname@example.org