Pensions on Divorce

Pensions on divorce

The law surrounding pensions is extremely complicated and it is absolutely paramount that expert advice is obtained from the outset. Your future financial security is fundamental following a divorce which is why pensions and divorce are a speciality at McAlister Family Law.

When considering a financial settlement, the court takes into account each party’s pension provision. How much of that pension which will be taken into account will depend on how long the parties have been paying into their individual schemes and the length of marriage. In certain circumstances, pensions accrued prior to marriage and following separation can be treated differently to pension accrued during the marriage.

McAlister Family Law is recognised as being leaders in this field having represented hundreds of clients with complex pension arrangements.

We have particular expertise in:

  • Police pensions – Representing police officers of all ranks and their spouses.
  • Armed services and Military
  • NHS and local government schemes
  • Teacher’s pensions.
  • Pension SIPPS

How pensions are valued on divorce

When considering the value of a pension during a divorce, the court will have regard to the pension Cash Equivalent Transfer Value (CETV). This figure can be obtained by contacting your pension administrator.

For some schemes, the CETV can take six weeks to obtain. We would advise that the CETV is requested as soon as possible to avoid any delay to the negotiations.

In certain circumstances, the CETV is the correct valuation to place on a pension to achieve a fair valuation of pension benefits.  In other cases, the CETV as calculated by the pension scheme would not achieve a fair result and in those cases, we would need to instruct a pension actuary to revalue the pension rights.

Your options for pensions and divorce

Option one – Offsetting

This is where a spouse’s claim against a pension is offset against other capital assets. For example, rather than receive a share of the pension a spouse may prefer to take a greater slice of the house or savings. If the pension is offset, then it is usually accepted by the court that a discount should be applied to the amount that would have been transferred under a Pension Sharing Order to reflect the early receipt of the benefit. This option will ensure that both the lump sum and income element of their pension remains intact.

For offsetting to be an option, there would need to be sufficient capital to fully or partially buy out pension claims.

Option Two – Pension attachment (earmarking)

This is an order requiring a proportion of the pension lump sum and/or pension income or death in service grant to be paid to a spouse. The pension provider is responsible for making the payments to the spouse direct. The order has to be expressed as a percentage or fraction and is different to a Pension Sharing Order as it applies to the value of your pension as at the date of your retirement. Many spouses do not agree to this option, as they will lose benefits on remarriage.

Option Three – Pension Sharing

During the discussion of pensions and divorce, a pension sharing order is available upon divorce or dissolution but not upon judicial separation. This is where a percentage of your pension is transferred to your spouse. Your spouse then holds a pension in his or her own name, also with the police pension scheme. Your spouse will then be unable to draw down on their pension, until they reach the age of 60. This achieves a clean break and any contributions made by the officer to their pension following the pension sharing order will only increase their pension pot.

Whether this is suitable for you will depend on your length of service, the pension scheme on which you are on and the value of the other matrimonial assets.

A Pension Sharing Order cannot be made if your divorce proceedings were commenced prior to 1 December 2000.

The McAlister Family Law team understands the complexities surrounding pensions and divorce and can work in partnership with other financial specialists if required to make sure that you get a fair deal.


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