Splitting a Pension in Divorce

6th January 2016

If you are getting a divorce, you might overlook the opportunity to divide your spouse's pension during the financial settlement. A pension is an asset and can often be one of the biggest, aside from the family home so if you miss this in the settlement, it can have a significant impact.

There are three options when apportioning a pension and it is important that you look at the benefits and drawbacks of each of these options with a specialist Divorce Solicitor before you decide how to proceed.

The three options are: Pension Offsetting, Earmarking and Sharing.

Pension Offsetting

Pension offsetting used to be the most common option when apportioning a pension in a divorce. In simple terms, the value of the pension is offset against another asset. This can cause an issue when the pension is the biggest asset though and there is nothing else to offset the value against.

Pension Earmarking

The pension earmarking option allows a part of the pension to be earmarked for the ex-partner, usually when they retire. This can impact on both parties in the divorce though as there is no opportunity for a clean break in these circumstances and there are also risks associated with the pension ending if the ex-spouse dies, delays retirement or stops contributing to the pension scheme.

This can be particularly worrying for women who have not had the opportunity to build up their own pension scheme. In addition, pension benefits are treated as income and are therefore taxable, even though some of this is being paid to their ex-spouse.

Pension Sharing

Pension sharing allows the couple to share the pension fund. The Court will order the split of the pension and then the company which administers the pension has four months to apply the order. This allows the couple to get a clean break order.

For free initial legal advice about splitting a pension in divorce, call our Divorce Solicitors on 01618558357 or contact us and we will help you.

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