How Are Pensions Split In A Divorce?

Pensions can often be overlooked when a couple is in the process of divorce and are considering how to split their finances, but they are actually some of the more valuable assets that an individual can accrue throughout their life.

Unfortunately, the task of splitting pensions during divorce is often not taken into account until the divorce proceedings have begun, where they can actually make matters very complicated due to their complex nature.

Our solicitors at TG Baynes have witnessed first-hand how stressful divorce can be and are aware that the majority of our clients wish for the process to be quick and easy so that they can get on with their new lives. However, it’s important to have a comprehensive understanding of the various processes that make up a divorce so you can always remain legally and financially safeguarded.

First of all, it is essential to know that within the process of divorce, pensions are considered as ‘marital property’ meaning that the pension benefits that have accumulated during a marriage will then be subject to division as part of the divorce settlement. However, pension funds that were accrued before or after the marriage is not subject the division in standard practice.

To speak to a member of our staff regarding divorce and pensions, please contact us on 020 8201 7777 or email us at info@tgbaynes.com. Alternatively, you can use our enquiry form and someone will be in contact shortly.

How can pensions be split in divorce?

During the divorce process, pensions are normally divided via pension offsetting, a pension sharing order or a pension earmarking order.

No matter which method is chosen, it is crucial to understand that the process of splitting pensions during a divorce is often complicated and will almost certainly require the assistance of an expert divorce and pensions solicitor.

Pension offsetting

Pension offsetting involves one of the two spouses surrendering any claim to the other’s pensions, and in exchange receiving a larger share of any of the shared marital assets that the couple have accrued throughout the marriage.

This is often a favourable option for many couples due to it providing a clean break and cutting all financial ties between the two parties, allowing both spouses to move on and live their lives separately. The pension administrators will be required to provide a valuation for the pension fund (referred to as a CETV) and the value of the pension will be weighed up against the value of the marital assets during the divorce settlement process.

Pension sharing orders

A pension-sharing order involves the allocation of a portion of one spouse's pension benefits to the other spouse. Typically, this is achieved by establishing a new pension for the receiving spouse or augmenting an existing pension. The transfer amount is usually determined as a percentage based on the pension's value at the time of divorce. For instance, if a pension is valued at £300,000 and the sharing order designates 50%, then £150,000 will be transferred to the other spouse.

This approach has gained increasing popularity in recent years for its ability to establish a clean break between spouses and enable them to maintain separate pensions. Furthermore, it offers greater flexibility compared to other methods, as the receiving spouse gains more control over their pension.

Pension Earmarking orders

On the other hand, a pension earmarking order (also referred to as a pension attachment order) entails the allocation of a share of one spouse's pension benefits to the other.

In this case, the receiving spouse does not have an independent pension but receives a portion of their ex-spouse's pension payments whenever they are disbursed.

However, this approach is becoming less prevalent today due to its lack of flexibility and the fact that it obligates the receiving spouse to maintain dependence on their ex-spouse's pension.

How do you decide which pension-splitting option is best?

When choosing which pension splitting method is best for your specific circumstances, there are multiple variables to consider, such as:

• Pension amount
• The spouses' health and age
• Duration of the marriage
• Status of the pension (whether it is currently being paid out)

The overall value of the pension(s) is still one of the most crucial aspects of this decision, as this will decide how much will need to be split between the two divorcing parties. Despite this, it's important to take into account the age and health of both spouses. For instance, if one of the parties is much older and declining in health, they may need a bigger share of the pension benefits, so that they are able to remain financially stable during their retirement. Getting an actuarial report can help with comprehension in terms of these variables.

In the UK, the length of the marriage plays a crucial role in determining the amount of pension money accrued during that period. A shorter marriage will typically result in a lesser value of pension assets compared to a marriage that lasted for many years. On the other hand, if a marriage endures for a significant period, the assets from the pension are likely to become a substantial consideration and require special attention during the division process.

It is important to emphasize that dividing pensions during a divorce can be a complex and arduous process that requires careful navigation and understanding of the various factors involved.

Our solicitors at TG Baynes are experts in this particular field and will be able to answer any queries you may have about the various methods and variables to be considered when splitting pensions during a divorce.

How can our divorce and pension solicitors help you?

Our expert team of divorce and pension solicitors have years of experience helping clients to fairly divide their financial assets in a way that is mutually agreeable for both parties.

Our solicitors provide a bespoke service with advice tailored to your specific circumstances. We understand that any divorce is usually a difficult and emotionally intense time, so we aim to reduce that stress as much as possible.

Our team of divorce solicitors has extensive experience in handling all of the various scenarios related to pension division during divorce. We possess a deep understanding of the precise methods employed in dividing pensions. You can rely on our highly experienced team to ensure that all necessary paperwork and documentation is promptly and efficiently submitted while meeting all requirements.

Our team prefer a collaborative approach that aims to minimise conflict while achieving the best possible outcome for you. Throughout the process, our divorce solicitors will maintain open communication, recognizing that effective communication is vital in simplifying and reducing stress during divorce proceedings.

Get in contact with our divorce and pension solicitors in Bexleyheath, Dartford and Orpington

To contact one of our expert divorce and pensions solicitors, you can call us on 020 8301 7777 or alternatively, you can use our contact form. You can also reach us by emailing info@tgbaynes.com.