Pension Sharing on Divorce

The family team at Herrington Carmichael is experienced in dealing with all matters in relation to pensions following the breakdown of the relationship between a married couple or civil partners. We pride ourselves on being highly approachable, sensitive, and supportive during what can be a difficult and emotional time.

Common Questions

What is a Pension sharing Order?

A Pension Sharing Order is an Order from the Family Court which will set out what percentage of a pension fund will be transferred from one spouse’s pension fund (the owner spouse) to the other spouse (the non-owner spouse) and which will be put into effect after a divorce.

The pension fund trustees will need an Order of the court before they will take any action and the formal instructions will be set out on a document called a Pension Sharing Annex.

The recipient of a pension sharing order will effectively receive a percentage of the pension fund of the owner spouse.  This will be sliced out at the implementation date and will either be transferred within the owner spouse’s pension scheme (internal transfer) or the non-owner spouse may choose to transfer it out; into a scheme of their own (external transfer).

A Pension Sharing Order cannot be implemented until the divorce has been completed and the decree absolute has been made by the court. The pension fund administrators will have 4 months to implement the Pension Sharing Order from either the date of the decree absolute or the day they receive the documents from the court whichever is the latest.

Do I need to share my pension with my spouse on divorce?

The general rule is that pensions that have been accrued during a marriage, to include any period of pre-marital cohabitation, should be shared equally.  However, that is only a guide and it may often be appropriate not to share the pensions equally.

In some cases, the parties may prefer not to share the pensions and instead, for one party to receive a greater share of the capital in lieu of a pension investment.  For example, it may suit the family for one party to retain the family home and for the other party to retain their pension instead of receiving a share in the family home.

We can advise on what outcome may be more suitable, financially and otherwise.

We cannot advise on tax issues and you will need to seek separate expert advice on such matters.

What is my divorce pension entitlement?

When considering the value of a pension, solicitors and the family court initially use the Cash Equivalent Value (CEV) as a guide.  You can obtain this from your pension administrator.   Sometimes, however, the CEV is not an accurate representation of the fund value and it may be advisable to obtain a valuation report from a “pension on divorce expert” (PODE).

As a guide, we would recommend that a report is obtained from an expert for any pension worth more than £100,000 or a pension arising from employment in the uniformed services, such as the police, nursing staff or the army.  This is because the CEV of these pensions are less likely to be representative of the real value.

We can advise on what outcome may be more suitable, financially and otherwise.

We cannot advise on tax issues and you will need to seek separate expert advice on such matters.

How will my pension be shared on divorce?

Once an accurate value has been ascertained, we can consider how best to share the pension so as to achieve a fair outcome.  Fairness may be achieved, for example, by redistributing the pension so that each party has the same pension income on retirement.

The Court can only make an order in relation to the sharing of a pension if divorce proceedings have been issued and an Order can only be implemented once the divorce has been finalised.  The types of Pension Order that can be made by the Family Court on divorce are:

  1. A Pension Sharing Order
  2. A Pension Attachment Order
What is a Pension Sharing Order?

A Pension Sharing Order provides for a slice of the pension of an “owner spouse” to be transferred into a separate pension fund solely owned by the “non-owner spouse”.  The owner spouse can then choose to draw down or rebuild their remaining fund for their sole benefit whilst the non-owner spouse will then own their own fund and can similarly choose to draw it down or continue to invest in the fund for their sole benefit.

A Pension Sharing Order means that the parties can achieve a Pension Clean Break i.e. a dismissal of their future potential further pension claims against the other.

The mechanics of implementing the Pension Sharing Order will be dealt with by the pension trustees.  They will be served with a copy of the order and will be required to liaise with both the owner spouse and the non-owner spouse to ensure that the fund is correctly credited to a fund owned the receiving party.

What is a Pension Attachment Order?

A Pension Attachment Order provides one party with a monthly payment from a pension owned by their former spouse.

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    The recent guidance from the family courts as set out by the attached PAG guidance shows that the option of a husband arguing that his contributions to the pension prior to the marriage should be ring fenced is becoming less and less favoured by the courts.  We will need to seek guidance from a pension on divorce expert or actuary in working out how to offset or trade capital in a property for an interest in a pension.  Given that the pension is not readily available there is a premium on capital which is available now (the utlitity value)

    The Pensions and Lifetimes Savings Association have produced a report on the retirement living standards which shows the types of incomes which are required* (in 2021) for a modest or “minimum” (£10,900 per annum), “moderate” (£20,800 per annum) and comfortable (£33,600 per annum) lifestyle in retirement.

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