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Pensions & Divorce

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Pensions & Divorce

Pension plans are included in the matrimonial assets which are to be divided during a divorce. During the financial order proceedings (formerly ancillary relief proceedings) it is necessary to identify and include any pension arrangements in the divorce settlement, obtain a suitable valuation of the pension assets, either offset, share or attach the pension assets as most suitable for the client and finally implement any pension orders.

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    Offsetting

    This offers a completely clean break between the ex-spouses. In this scenario one spouse retains the pension and the other is awarded or retains matrimonial assets which are considered to be of equal value. Most commonly the pension is offset against the value of the marital home, these being the most valuable of all the matrimonial assets. When the pension fund is quite large and in order to keep it intact the husband would need to give up all or nearly all of the remaining matrimonial assets.

    Attachment

    An attachment order is a direction from the court which obliges the trustees of a pension scheme to pay benefits directly to an ex-spouse, rather than the member spouse. The order may be made against one or more of the following pension benefits:

    1. The pension commencement lump sum (Tax free Cash)
    2. The member’s pension
    3. The spouse’s death-in-service lump sum

    Sharing

    A sharing order has the major advantage over attachment of allowing a clean break (remember this is a key objective of solicitors acting in a divorce case). Under a sharing order the pension asset is divided into two, and one part is legally transferred to the ex-spouse. The receiving spouse now has complete control over their part of the pension and may take benefits as and when it suits them

    There are three ways in which a sharing order may be implemented:

    1. The ex-spouse may be offered membership of the pension scheme
    2. The ex-spouse may be offered a transfer to their own pension plan
    3. The trustees may choose to offer both options

    Since December 2000 sharing has commonly been considered the most favourable option after offsetting.

    Pension review service – Is your pension still suitable for you?

    We will advise you whether your funds, portfolio style, pension type and product provider are still suitable for your needs. We will compare it to the market place to confirm its continued suitability, whether any other products or providers in the market place would be more suitable for your needs. Also, we will review your investment timeline, personal situation, attitude to risk, capacity for loss and any changes in your circumstances that may impact on the continued suitability.