What will happen to my pension on divorce?

There are many things to consider when going through a divorce and your pension is certainly one of them. A pension is often a person’s most valuable asset, or it will be when it comes to it being paid. There is a need to consider your pension assets when you are going through a divorce and it is important to seek clear advice on what can be done with your pensions on divorce and what each option means.

What options do you have when dealing with your pensions on divorce?

The court can make orders in relation to pensions; however, the most appropriate order will depend on the circumstances of your case.

The court might make no order in respect of your pensions. This would be most common if you have been married for a short period of time or you are at the very beginning of your career and therefore you have not accrued much in the way of your pension.

However, there are three specific orders that the court may make in respect of your pensions. Please see below for more information.

Option 1 – Pension sharing orders

Since December 2000 , the court has the power to ‘split’ pension rights at the time of divorce. A pension sharing order is when a proportion of one spouse’s pension is taken from their pension pot and invested into a separate pension pot in the name of the other spouse. This allows both parties to have immediate control over their own pension provisions.

Pension sharing orders are the most common type of order that will be made in a financial settlement. If you or your spouse have more than one pension, then it may be possible for the pension sharing order to be made in relation to each pension that you have. Before making a pension sharing order, it is common for the court to seek the advice of a pensions on divorce expert who can provide advice and carry out the calculations necessary to ensure equality of income in retirement if that is your goal.

Option 2 – Offsetting pension values

It may be that the most appropriate arrangement is for one spouse to keep their entire pension and for the other to receive one type of asset in return. For example, a lump sum payment or equity in the family home. Offsetting calculations can be quite complex and as with pension sharing orders, it is common for the court to seek the advice of a pensions on divorce expert to ensure an appropriate value is allocated for the offset.

Option 3 – Pension attachment orders

Pension attachment orders are not as common since the introduction of pension sharing orders. Pension attachment orders provide that once a pension goes into payment, a set amount will be paid directly to the other spouse. One big drawback of pension attachment order is that the pension capital remains invested in your spouse’s pension, so you have no control over its investment or draw down. Pension attachment orders end on re-marriage or death and therefore there is a risk that you will never benefit from this order if your spouse remarries or passes away.

It is important to understand that pensions are an asset and, in many cases, the personal or workplace pensions that you or your partner have will be considered when a financial settlement is worked out.

How can we help?

Pensions on divorce can become very complex and it is important that you seek tailored legal advice. Our team of family law specialists understand that following a decision to divorce, you may suddenly feel financially insecure and left not knowing where you stand.

Our team are experts in the field of matrimonial finances and are able to provide you with the advice and the support you need to understand your financial position and what your options are in terms of progressing towards an agreement and the terms of a settlement itself.

Taking advice early on help can help put your mind at ease as you will be able to ask any questions that you may have and feel better informed about the process. We offer an initial fixed appointment for one hour at a cost of £250 plus VAT. If you choose to instruct us the cost of the meeting will be credited against your first invoice.

If you would like to speak to a member of our Family team about any of the issues raised in this article, please do contact us on +44 (0)1276 686 222, or use the contact form below.

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.