For couples who have been married for a long time, when looking at financial assets, it can often be the pension pot that is the biggest asset they have. It might be the case that one spouse has a much larger pension than the other. For example, if one stayed home to raise the children or worked part-time whilst the other continued to work.

Trying to agree whether or not to split a pension can often be difficult during the divorce process, as people can be very protective over their pensions as they feel they have earned them throughout their working career and also need them on retirement.

Pension Sharing Order

One of the most common Orders made in relation to pensions is a Pension Sharing Order. This is where the Court awards a percentage of one person’s pension value to the other. That share would then be removed from that person’s pension and placed into a pension in the other person’s name. Sometimes it can be transferred into an existing pension scheme but there are occasions when it would be needed to be transferred into a new one. This type of Order allows for you to have a clean break from your spouse and greater control over your future. There are sometimes costs involved in implementing a Pension Sharing Order, as some pension providers charge an administration fee to do this. If this is the case, it is important to determine who will be paying these additional fees or whether they will be shared prior to making the Pension Sharing Order.

Pension Offsetting

Another option is Pension Offsetting. This means you both keep your own pensions but offset the value of these against your other assets. For example, if one party has a larger pension pot than the other, the other party may get a higher percentage of the value in the family home. Some people would prefer this option, particularly if they want to remain in the family home, as it will mean they have to find less money to buy their spouse’s share. However, it would not assist in providing an income in the future and this may be something that is important down the line.

Pension Attachment Order

A third option would be a Pension Attachment Order. This means you would receive part of the pension income or lump sum when your spouse retires and starts to receive their pension. This does not allow you to have a clean break from one another and the income would not be received until they retire. Further, if the person whose pension it is dies before they retire, then your share of their monthly payments will be lost.

It is important to seek legal and financial advice when it comes to determining what to do with pensions on divorce. You may consider appointing an expert, such as an Actuary, for them to prepare a report on how best to equalise your income or capital and how the pensions are best dealt with.

Our Divorce and Family Solicitors in Rochdale are on hand to help if you need any advice regarding your Divorce. 01706 644187.