Pension money matters in divorce
Pensions are always taken into account when resolving money matters in divorce or civil partnership dissolution.
Pensions on divorce
Pension options in divorce
Pensions can be dealt with in a number of ways depending upon the particular circumstances of your case. Currently the three main pension options in divorce within England and Wales are:
Pension Sharing – This is where one spouse receives a percentage share of their ex-partners pensions. This is either transferred into a separate pension scheme in their name, this is known as an External Transfer; or transferred into a separate pot within their former partners existing pension scheme, known as an Internal Transfer.
Pension Offsetting – This is where the value of a pension if offset against other assets. For example, one spouse may receive a greater share of the family home or savings to compensate them for the lack of pension provision.
Pension Attachment (formerly known as earmarking) – This means that a percentage of the member’s pension is set aside for the ex-spouse to claim on retirement. This is not necessarily the best option and pension sharing is often the preferred method. Attachment benefits are not necessarily watertight and are lost if the ex-spouse remarries or the member spouse dies.
What pension information do I need?
You should start by making a list of the pensions you currently contribute to together with any previous pensions you may have. Most pension providers provide an annual statement which is a useful starting point.
A CETV (Cash Equivalent Transfer value) or CEB (Cash Equivalent Benefit) statement details the capital value of the pension benefits (income and potential lump sum) that have accrued to date or which are in payment.
With money purchase schemes the CETV statement details the transfer value of the funds that have accrued to date and this may be different to the actual fund values depending on the scheme.
CETV statements of final salary schemes rarely reflect the true value of the pension rights. For example, if the scheme is underfunded the transfer value may be reduced to reflect this this. This is a very complex area and professional advice is important.
Can a pension in payment be shared?
Yes, however the receiving spouse will not be able to take a lump sum from any benefits upon transfer.
State pensions on divorce
The basic State Pension cannot be shared but the Additional State Pension can.
Oversees orders made against UK pension schemes
In the vast majority of cases UK pension providers will not implement Orders made in different jurisdictions unless a ‘mirror’ Order is obtained in the UK. This is usually a straight forward application to the Court and our Divorce Lawyers can help you with this.
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