By Judith Rouse & Tracey Cook

There is a trend in the UK for divorces to be between older couples with adult children.  Financial settlements in these cases often pivot around very different factors than those of a younger couple with dependent children. There may be a mortgage free family home, inheritances and substantial pension funds.

Without advice and guidance pensions are often overlooked  or offset against the family home as if the two assets are similar, potentially leaving one party with inadequate financial provision in retirement.  If one of them couple stopped working or worked part time to care for the family then even their state pension could be less than the other.

Below are answers to some frequently asked questions about pensions on divorce:

I built up my pension before the marriage, why should I give that up?

A person who has built up a proportion of their pension prior to the marriage, may feel that it is unfair for this to be shared on divorce. However, if is a long marriage, the couple are coming closer to retirement age and the pensions built up during the marriage are not sufficient to cover both their needs then it is likely that the court will take this pension into account irrespective of when contributions were made.

What are the options for dealing with pensions?

The most common method of dividing pension assets is a Pension Sharing Order.  This transfers a percentage of one spouse’s pension to a pension for the other. This is done by the pension scheme. A pension cannot be shared in this way without a court order.

There are other orders that can be made relating to pensions but they are cumbersome and, since pension sharing orders became available, are only used on rare occasions where a pension sharing order is considered unsuitable.

Can pensions be offset against other assets, such as the family home?

An alternative to pension sharing is ‘Offsetting’. This option is not recommended without advice from a pensions’ expert.  It is like comparing apples and carrots.  The pension value is likely to increase and importantly, will provide an annual income in retirement.  In the absence of sufficient pension provision, the person without a pension may end up having to sell the home to provide an income in later life.

When is it best to get expert advice?

Advice from a Pensions’ expert is highly recommended, in particular, in the following situations:

• the cash equivalent values exceed £100,000 and are not simple defined contributions pensions;
• one of the pensions is a defined benefit pension (often called a final salary scheme);
• there is a significant age gap between both parties;
• where one spouse is approaching eligibility to take a pension freedom;
• offsetting is being considered;

 

How can I get information about my state pension?

A  State Pension Forecast can be obtained through the government website at https://www.gov.uk/check-state-pension

For expert legal advice, please contact our friendly family law solicitors in Wells, Street or Somerton.