Pension Treatment on Divorce

Just eight per cent of divorce settlements fully consider the assets of a spouses pension fund. This article explains how to make pensions count in any divorce settlement. There are no hard and fast rules regarding your financial rights in the breakdown of a relationship.


There will often be a range of possible solutions to dividing the assets, and it could be that a couple comes to an amicable agreement, with lawyers simply drafted in to formalise the agreement. Unfortunately though, in many cases, courts will be involved in deciding the division of assets.


The financial split can be affected by many factors, including the age of those involved, the length of the relationship, and the needs of each party and any children, and will routinely address income, property and savings.


A pension is often the second most significant capital asset in a marriage and so should be taken into account by a couple and their representatives when arranging a divorce or dissolving a civil partnership.


But pensions can be complex and confusing at the best of times, and are all-too-often glossed over, leaving many people unknowingly with a lot less than they are entitled to. The details must be thoroughly scrutinised by an experienced family law expert and, in some cases, an expert or a pension actuary brought in to help.


Frequently, one person has a substantial pension while the other might have none or a very limited pension provision because, for example, they have given up their job to look after the children.


If we are honest, it is normally the wife who has the lowest - if any - pension provision, as it is assumed during the marriage that she will share in the benefit of the husbands pension income when he retires. The pension is for both of them in effect - until things go wrong.


If the marriage fails, there is no automatic entitlement to a spouses private or occupational pension. In addition, there are rules which allow one divorced spouse to take National Insurance contributions from the other to make up deficiencies in their basic state pension.


After a divorce, it is often the case that the wife has little chance of being able to sufficiently build up a pension of her own during any working life that may be left to her.


There are a number of different roads couples can go down to tackle pension assets depending on their circumstances. These are offsetting, earmarking and pension-sharing.


In this day and age, pension sharing is the preferred route of most divorce courts but offsetting and, to a lesser extent earmarking, are also still valid in some cases. This is why it is vital you discuss your case and unique set of circumstances with an experienced family lawyer. This will give you the best chance of a fair, expedient outcome.