In divorce (for a married couple) or dissolution (for a civil partnership), the pension can often be the second biggest asset – usually the family home is the biggest. You can split pensions several ways, so it’s worth understanding the options before deciding what’s best for you.
Initially, both people list all the different pensions they both have, and get a copy of the rules for each scheme. This could include:
- Personal pension scheme
- Schemes you have through work
- Additional State Pension (but not the basic State Pension)
Only the person who is a member of the pension scheme, or who has taken out the pension, can ask for a valuation. Pensions must be valued using the ‘cash equivalent value’, which is the amount that you would get if you moved your pension elsewhere and might be less than the ‘fund value’ of your pension because it will include charges for transferring.
In England and Wales, the total value of the pensions you have each built up is taken into account. This doesn’t only mean the pensions that you or your ex-partner built up while you were married or in a civil partnership, but all of your pensions (except the basic State Pension).
How you can actually split pensions can be complicated and it is highly advisable to seek advice from a solicitor and a financial adviser. There are a number of options to consider:
You get a percentage share of any one (or more) of your ex-partner’s pensions. This is either transferred into a pension in your name or you can join your ex-partner’s pension scheme.
The value of any pensions is offset against other assets. For example, you might get a bigger share of the family home in return for your ex-partner keeping their pension.
Deferred pension sharing
This is used if your ex-partner’s pension is being shared. They have already retired and are receiving their pension, but you haven’t retired and are too young to be paid a pension. You both make an agreement to share the pension at a later date.
Deferred lump sum
You get a lump sum payment from your ex-partner’s pension when they retire. Pensions attachment order You get some of your ex-partner’s pension when it starts being paid to them. You can get some of the pension income, the lump sum or both. But you can’t get pension payments before your ex-partner has started taking their pension. If you and/or your ex-partner have retired, the pensions can still be split, but the rules are different. It isn’t possible to take a lump sum from your ex-partner’s pension if they are already receiving an income from it. Amy Langlois, Family Solicitor says “You and your ex-partner can come to an agreement regarding the pensions but only a court can make the agreement legally binding. It’s vital to get advice from a family lawyer who knows about pensions in divorce or dissolution as the rules are complicated.”
Our Family Team, based in Christchurch, also cover Bournemouth, Poole and the New Forest. If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 and Amy or her team, will be happy to chat about your situation and your particular requirements.