Pensions and Divorce: Your Survival Guide

The division of assets after a divorce can be a difficult task, especially when considering pension plans and retirement. Dismissing pensions is often the main mistake which people encounter, there being different implications towards the splitting or sharing of a pension.

How Are Assets Split in a Divorce?

When a couple file for a divorce and cannot come to an agreement on how to divide their financial assets, the court can decide for them.

From December 2000, it was decided that pensions must be included in a divorce settlement, becoming part of the total value of marital assets you share with your partner.

There are multiple different orders which can be agreed when settling the division of pensions in a divorce, including:

Pension sharing

A formal agreement that divides pension assets at the time of the divorce.

Pension offsetting

When there are other assets that the value of the pension can be offset against, including property of the same value of the pension.

Pension earmarking

When one party receives all, or part of the pension, to be paid to one person when the other starts to draw pension benefits.

What Is a Pension Compensation Sharing Order?

A pension sharing order is a legal way to divide up a pension between spouses in a divorce or dissolution of their civil partnership.

Pension sharing now allows a couple getting a divorce to divide up any pensions between them or create a new pension for the other spouse under what is known as a clean break order.

Only the court can make a pension sharing order as part of a financial remedy order, either by agreement with your partner or by going to court. A pension sharing order will take effect from the date of your decree absolute.

How Does a Pension Sharing Order Work?

A pension sharing order will give each person a right to part of a pension. In some cases, there would be a singular pension if only one person in the couple was working and the other was taking care of the children or both pensions.

This can be transferred to a new existing pension scheme or stay in the original, however the only pensions which cannot be shared are the basic pension and the new state pension.

State Pension in a Divorce

The court can treat your state pension as a financial asset , deciding if some of your state pension should be shared with your former partner. The court will need details of the state pensions you could or do get. However, the date which you reached the state pension age will depend on the way the pension is divided after the divorce.

For more information regarding pensions and divorce, contact you nearest Eaton’s office today to chat with one of our family lawyers.