Divorce and Pensions: Your Rights Under the Law 

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Divorce and pensions

When a divorce or dissolution of a civil partnership or marriage is taking place, it is important to consider all valuable assets, including pension schemes. They can often be very high in value and can provide a long-term, sustainable source of income for the pension holder and their ex-spouse or civil partner. As a result, they should be considered during financial arrangement discussions.

Within divorce law, schemes which will be considered as a shareable pension will be:

·        Private Pensions

·        Pensions from your place of work

Non-shareable pension schemes include:

·        Basic State Pensions

Despite the non-shareable nature of the state pension, the court will still consider it as a source of income for an individual when assessing their future financial needs.

Due to the variety of schemes which are applicable when assessing divorce settlements, you should ensure that you have explored this avenue.

What is a financial arrangement?

 

A financial arrangement refers to the process of dividing the financial assets and liabilities of a married couple in the event of a divorce. The arrangement usually involves determining how the couple’s property, pensions, savings, investments, and other assets will be divided, as well as how any debts and liabilities will be apportioned.

Under UK law, financial arrangements are often negotiated through a process of mediation, arbitration or negotiation. If the parties cannot reach an agreement, they may need to go to court, where a judge will determine the financial arrangement based on various factors such as the needs of the parties, the length of the marriage, their contributions to the marriage, and the welfare of any children.

It is important to note that each case is unique, and the outcome of a financial arrangement will depend on the specific circumstances of the case. Therefore, it is advisable to seek legal advice from a solicitor or a family lawyer to guide you through the process. 

Court Considerations of your Pensions

When assessing the pensions of the parties to a marriage, the court will consider all of the pension schemes of the parties, not just those which have been built up during the marriage or civil partnership.

Pre-marital assets can be included within the court’s assessment of finances unless there is an alternative financial agreement which states that pension benefits that have been built up before the beginning of the marriage or civil partnership are excluded. 

Divorce and Pensions: Division of Pensions

When dividing pensions, an ex-spouse can be provided with a share of the pension. This means that you will receive a share of your ex-spouse’s pension in percentage form. This percentage can be calculated through the application of a formula. The formula takes the receiving spouse’s age and earnings into consideration, as well as other situational financial factors.

For pension sharing to take place, you could be named as a member of your spouse’s pension or alternatively, a separate fund could be made for your share. This is often a favourable option, as it allows for a clean break divorce. This type of divorce is now held in high regard by the court, as the Clean Break Order stops parties from claiming any financial benefits from their ex-spouse after the divorce, thus allowing them to move on with their lives independently.

If a Clean Break Order or other financial agreement has not been made, both parties can propose a claim on their ex-spouse’s pension, irrespective of the time period which may have passed since their divorce.

Depending on the scheme, membership of the original pension scheme may be required. For example, the NHS pension states that membership is mandatory. This requirement can actually be beneficial to a party as it may entitle them to pension benefits which they would not have access to if they set up a separate fund.

Pension sharing can still take place following retirement and it can be arranged for parties to take a lump sum from their ex-spouse’s pension even when payment has already commenced.

As pension sharing can often be complicated and require the setting up of a pension, it is important to seek advice from a financial advisor.

Court Orders

 If you decide that pension sharing is an effective way to divide assets in your divorce or dissolution, a court order will be required. For pension sharing, this will come in the form of a pension sharing order. This document will state the percentage of the pension which will be shared to you or your ex-spouse. Though, this order can only be provided upon provision of the final order, when the divorce or dissolution has been completed.

If your ex-spouse has not started taking their pension yet, pension attachment orders may be appropriate. Previously, these orders were known as earmarking orders. This order states that upon the provision of their pension benefits, you will also receive income, a lump sum, or a combination of both. It should be noted that upon your ex-spouses’ death, this order will be rendered void. Therefore it cannot be relied upon in the same manner which a pension sharing order can be. 

Provision of the Pension Benefits

 Once the relevant documentation has been completed and sent to the provider, the administrator of the pension can take up to four months to provide the funds. This time frame can differ from provider to provider.

Alternatives to Pension Division

Some parties prefer to omit the inclusion of pension assets into their financial agreement. If this applies to your situation, pension offsetting can be an appropriate tool. This arrangement states that parties can ‘offset’ the provision of pension benefits in exchange for another valuable asset such as the family home, or a bigger share in it at the least.

When this tool is being utilised, it is important to bear in mind that we cannot always equate a long term financial source such as a pension with the immediate provision of assets e.g. savings in the bank or a share in property. Furthermore, some forecasts for the future value of pensions can be unreliable and as a result, reliable independent advice should be sought.

 

Legal Costs of Financial Arrangements within Divorces or Dissolutions

 When financial remedy proceedings are occurring within a divorce or dissolution, Rule 28.3(5) within the Family Procedure Rules states that “the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party.” Therefore, parties are generally expected to bear their own costs. For this area of the law, this could include fees for the legal advice which you have sought and advocacy costs if an expert has represented you in court. If you have sought independent financial advice from a pension’s expert, you will also be liable for these costs.

Nevertheless, if one party has behaved unreasonably and the court deems that they have failed to follow the Family Procedure Rules in a manner which they consider relevant, an order for costs can be produced. 

How can we help with divorce and pensions?

 

At Expert Family Law, we are able to consult our panel of family law solicitors to locate a specialist whose skills would best serve you.

Irrespective of whether your case is funded by legal aid or private funding, our nationwide experts can be on hand to provide advice regarding divorce proceedings, ancillary relief, domestic abuse or child arrangements.

We understand that due to the nature of this area of the law, matters must be dealt with sensitively. In order to relieve some of the anxiety and potential upset in the situation, the solicitors which we represent must be endorsed by the Solicitors Regulation Authority, thus allowing us to rely upon their knowledge and skills.

To find out more about how we can help you locate the ideal firm for your case, please contact us via our call request form. From here, we will assess your matter and return to you with personalised advice on which solicitor you should proceed with.

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