What Happens to Pensions in a Divorce?
Is my ex-husband or wife entitled to a share of my pension?
Pensions can be considered part of the marital assets in a divorce in England and Wales, so your ex-husband or wife may be entitled to a share of your pension as part of the divorce financial settlement. However, this depends on several factors, including the length of your marriage, your respective financial needs, and how your other marital assets are distributed.
Here’s how your entitlement to your pension could be handled in a divorce:
Pension Valuation: Initially, the pension must be valued as part of the financial disclosure process. This valuation will help determine the extent to which the pension should be included in the divisible marital assets.
Financial Settlement: The division of pension rights can be addressed in several ways:
Pension Sharing: You may receive a percentage of the pension as a direct transfer into a pension in your own name. This is a clean break approach as it separates your financial ties concerning the pension.
Pension Offsetting: Instead of a direct share of the pension, you might receive other assets equivalent in value to the share of the pension you might have received. For example, you might get a larger portion of the equity in the family home.
Pension Attachment Order: This less common approach involves you receiving some of your ex-partner’s pension payments when they start drawing their pension.
Negotiation and Mediation: The specifics of how a pension will be divided can be negotiated and agreed between you, often with the help of solicitors or mediators. If an agreement can’t be reached, the court will decide based on what is fair and reasonable.
Legal Advice: It is crucial to seek legal advice to understand your rights and the options available for dealing with pension entitlements during your divorce. A solicitor can help ensure that all assets, including pensions, are considered in your financial settlement. Consulting a Pensions on Divorce Expert (“PODE”) is also important to understand the true value of any pensions and to ensure a fair settlement.
Thus, while you are not automatically entitled to your ex-partner’s pension by virtue of being married, the pension is considered in the financial settlement, and you may receive a portion depending on your circumstances, any negotiations that take place and the legal advice you follow.
Pension Sharing Order
Pension sharing is a legal arrangement in divorce proceedings that directly splits a pension or pensions between the divorcing parties. It allows for a portion of one spouse’s pension rights to be transferred to the other spouse, providing a clean break solution as it separates the pension assets at the time of the divorce. Here’s how it typically works:
Valuation: The first step in pension sharing is to value all the pensions involved. This is done to determine how much each party has accrued in terms of pension rights during the marriage. It’s important that a thorough valuation is completed to ensure fairness in the division.
Final Order and Pension Sharing Order: Once the divorce is finalised (marked by the Final Order, formerly known as a decree absolute), and if the court decides that pension sharing is appropriate, it will issue a Pension Sharing Order. This order will specify the percentage share each spouse will receive from the pension pot.
Implementation: After the Pension Sharing Order is issued, the pension provider is notified and required to implement the split. The provider will then either create a separate pension plan for the receiving spouse or transfer the agreed percentage into a different pension scheme that the spouse may have.
Charges and Fees: There are usually charges and fees associated with the division and transfer of pension rights, which need to be considered by both parties. These costs can vary depending on the pension provider and the complexity of the pension arrangements.
Independent Arrangement: The portion of the pension transferred to the receiving spouse is completely independent of the original pension holder’s fund once the transfer is complete. This means the receiving spouse manages their share independently and can decide how to invest it, when to draw benefits, and so forth, according to the rules of their specific pension scheme.
Pension sharing is particularly useful as it ensures that both parties have their own retirement funds post-divorce, which they can manage according to their individual needs and circumstances. It is one of the most straightforward methods of dealing with pensions on divorce, providing financial independence and clarity for both parties moving forward.
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Pension attachment
Pension attachment, also known as pension earmarking, is another method used to handle pensions within divorce proceedings in England and Wales, although is relatively rare. Unlike pension sharing, which splits the pension assets immediately upon divorce, pension attachment orders set aside a portion of one spouse’s future pension benefits to be paid to the other spouse when the pension begins to be drawn. Private pensions can also be subject to pension attachment orders.
How Pension Attachment Order Works
Order Issuance: During the divorce proceedings, the court can issue a pension attachment order, which directs that when the pension holder starts to receive pension benefits, a certain percentage of these benefits (which can include lump sum payments, retirement income, or death benefits) will be paid directly to the ex-spouse.
Deferred Benefit: The key aspect of a pension attachment order is that the ex-spouse must wait until the pension holder begins to draw their pension before receiving any payments. This means there is no immediate division or transfer of pension funds at the time of the divorce.
Direct Payment: When the pension benefits start, the pension provider pays the designated portion directly to the ex-spouse as specified in the order. The payments to the ex-spouse are treated as the pension holder's income for tax purposes.
Dependency: A significant consideration with pension attachment is that the ex-spouse's entitlement is directly tied to the pension holder's actions. If the pension holder delays retirement, the ex-spouse also must wait to receive any benefits. Additionally, the ex-spouse's entitlement ends if the pension holder dies (unless the order includes provision for survivor benefits) or if the ex-spouse remarries (specifically in the case of lump sum benefits).
Flexibility and Control: The pension holder retains control over the pension fund and can make decisions about investment and the timing of retirement, which can significantly impact the ex-spouse's financial planning.
Limitations and Considerations of Pension Attachment
Pension attachment order do not sever the financial ties between the divorcing parties in the way that pension sharing does. Because of its contingent and deferred nature, it is less commonly used today than pension sharing. Pension attachment can leave the ex-spouse in a precarious position, reliant on the decisions and life circumstances of their former partner, which can be a significant disadvantage.
In summary, pension attachment sets aside a future portion of one spouse's pension for the other, creating ongoing financial ties and dependency, unlike pension sharing which provides a clean break by splitting the pension assets at the time of divorce.
Pension Offsetting
Pension offsetting is a method used during divorce proceedings in England and Wales to deal with the division of pension assets. It involves compensating one spouse with other marital assets equivalent in value to their share of the pension savings.
The court would look at the value of the pension assets, and at the value of the non-pension assets and, with the assistance of an actuary, might calculate the appropriate payment to be made to one party by way of liquid assets, in lieu of any pension sharing or pension attachment order. An actuarial report is required as £1 of pension is not the same of £1 of liquid capital.
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Are all Pensions taken into account in a Divorce?
In a divorce, all pensions that either spouse accumulates during the marriage are typically considered part of the marital assets and are therefore subject to division. This includes personal private pensions, public sector pensions, workplace pensions, additional state pension benefits, and even overseas pensions if relevant. National Insurance contributions can affect State Pension entitlements and should be considered when assessing the value of all pensions.
State pensions cannot be divided but they may be taken into account when assessing the value of the assets in a financial settlement.
Each type of pension must be formally valued to accurately assess its worth at the time of divorce. However, pensions accrued before the marriage may be treated as pre-marital assets and could potentially be excluded, unless they significantly impact the financial fairness of the settlement.
It’s important to accurately disclose all pension assets during divorce proceedings, as failure to do so can lead to legal complications and possible claims in the future. The specific division of these assets can vary depending on factors such as the length of the marriage, each party’s financial needs, contributions to the marriage, and other circumstances unique to the case.
How is an English Pension shared in an Overseas Divorce?
When a divorce occurs overseas and involves a pension in England, the division of the pension is governed by English law if the pension arrangements are under English jurisdiction.
This means that even after an overseas divorce, an English pension can be shared through a court order from an English court. To initiate this process, the foreign divorce decree needs to be recognised by the English courts, which might require specific legal proceedings to ensure that the English court accepts the foreign judgment.
Once recognised, a pension sharing order can be sought in England. This order will detail how the pension should be divided and administered, typically resulting in a portion of the pension being transferred into a separate scheme for the ex-spouse, depending on the terms of the settlement.
It is crucial for individuals in this situation to seek specialised legal advice both in the country where the divorce was finalised and in England to navigate the complexities of cross-jurisdictional pension division effectively.
What Happens to An Overseas Pension in an English Divorce?
When dealing with an overseas pension in an English divorce, the process starts with your divorce solicitor consulting legal experts in the country where the pension is based. They will determine if the pension provider can implement a pension sharing or attachment order as directed by an English court. If this is not feasible, your solicitor will explore the possibility of obtaining a similar local order that can be enforced in that jurisdiction.
If transferring the pension to an English scheme is not possible or if the pension provider does not consent, other strategies may be considered. These include offsetting the value of the international pension against other marital assets.
Given the complexities involved, managing international pensions in a divorce requires the expertise of a solicitor skilled in handling intricate cases to ensure that you secure the pension rights needed for a stable future.
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How Can I Stop My Ex-partner From Getting My Pension?
In England and Wales pensions are considered part of the marital assets and are subject to division, just like any other asset. However, if you are looking to protect your pension from being claimed by your ex-partner, there are several approaches you could consider, though it's important to handle these matters with care and legal guidance:
1. Prenuptial or Postnuptial Agreement: If agreed upon before or during the marriage, pre and postnuptual agreements can specify how pensions should be treated in the event of a divorce. They need to be drafted correctly and fairly to be enforceable.
2. Offsetting: You might negotiate an agreement where you keep your entire pension, but your ex-partner receives other assets of equivalent value. This could include property, investments, or cash, thus offsetting her entitlement to the pension.
3. Clean Break Consent Order: Once you agree on a financial settlement, having a clean break consent order drafted and approved by the court is crucial. This legally binding agreement ensures that all financial ties are severed, preventing any future claims on each other's assets, including pensions.
4. Negotiation and Mediation: Engaging in mediation can help you and your ex-spouse reach a mutually agreeable settlement without the need for lengthy court battles. If you can agree on the division of other assets that may satisfy their financial needs, your spouse might not need to claim your pension.
5. Legal Advice: It’s essential to seek legal advice from a family law solicitor who can help you understand your options and rights regarding pension division. They can guide you through the legal process and represent your interests effectively.
Remember, trying to hide or dispose of assets dishonestly to prevent them from being included in a divorce settlement is illegal and can lead to severe legal consequences, including perjury charges. Always approach the division of assets, including pensions, transparently and fairly to avoid any legal repercussions.
Can My Ex-spouse Claim My State Pension In A Divorce?
In England and Wales, the basic State Pension is not typically divided in a divorce or dissolution of civil partnership because it is based on an individual's National Insurance contribution record and is non-transferable. However, additional State Pension benefits, which include the State Second Pension (formerly known as the State Earnings-Related Pension Scheme or SERPS) and the State Pension top-up, can be shared as part of a pension sharing order in a divorce.
The new State Pension scheme, introduced in April 2016, is also not directly divisible, but the courts can take it into account when making decisions about other financial assets in the divorce settlement. This means that while the State Pension itself cannot be split, its value may be offset by adjusting how other assets, such as private pensions or property, are divided.
For divorces where one party may have a significantly lower pension provision, the court can consider the disparity in pension income that each party is likely to receive upon retirement and may adjust the division of other assets accordingly to balance this out. It is essential to seek legal advice to understand how your and your spouse's pensions, including State Pension entitlements, will be treated in your specific circumstances during a divorce.
Can My Ex-spouse Claim my Pension Years After Divorce?
Your ex-spouse can potentially claim a portion of your pension years after the divorce if there was no financial settlement that conclusively dealt with the division of pension assets at the time of your divorce. This is because pensions are considered a marital asset, and like other assets, they can be divided during a divorce settlement.
If the pension was not addressed or specifically excluded in the financial settlement, or if there was no financial settlement at all, your ex-partner might still have a claim on your pension. This possibility exists until all financial ties have been legally resolved through a court order, typically either a consent order if you are settling by agreement, or a financial order if the court decides the settlement.
Therefore, to prevent any potential claims in the future, it is crucial to ensure that all financial matters, including pension rights, are fully resolved and legally documented at the time of divorce. If you are unsure about the status of your financial settlement regarding your pension, it would be wise to consult a legal expert who specialises in family law to clarify your position and take any necessary actions. Call us on 020 7242 6000 to speak to an experienced family lawyer who can talk you through your options.
Is My Partner Entitled To My Pension If We Are Separated?
If you choose to separate without divorcing or dissolving your civil partnership, you will not be entitled to a share of your partner's pension. However, you may still be eligible to receive a portion of your spouse's pension or a lump sum upon their death.
Pensions and Divorce: Financial Settlement
Pensions often represent a significant portion of the marital assets so ensuring the pension split is negotiated effectively is crucial. Our family lawyers have extensive experience in managing large pension settlements as part of the divorce.
If you would like to speak to one of our award winning team of family lawyers about your particular case call us today on
+44 20 7242 6000.