If you're getting a divorce or dissolving your civil partnership, you have a lot to think about – and, amid the turmoil, there are some things you might overlook. Pensions are one of these.
But protecting your
personal or workplace pension is something you should keep in mind as your living situation changes. When it comes to separating money and property, pensions should be on the list.
In this article, we answer some frequently asked questions about what happens to pensions after divorce.
Separating finances
A key aspect of
divorce is the separation of finances. The exact split has to be agreed on by both parties. If you can't decide, the court will get involved and sort out your finances for you.
Agreements between a separated couple aren't automatically legally binding. You need to apply to the court for a legal stamp of approval. In England, Wales and Northern Ireland, this is called a "consent order", and in Scotland a "qualifying agreement".
But the rules for splitting pensions vary depending on your marital status. The basic facts are these:
What are my options?
It's not just terminology that changes depending on the country you live in. In England, Wales and Northern Ireland, the pensions in question are calculated in total – it doesn't matter whether they were built up before or during the
marriage or civil partnership.
In Scotland, however, only the pensions built up during the marriage or civil partnership count. Any funds built up before or after the marriage or civil partnership are the sole preserve of the pension holder.
There are three ways of splitting pensions after divorce.
1. Pensions offsetting
In this situation, both individuals keep their pensions. But these are offset against the other assets. One party might receive less of their partner's pension pot in exchange for another asset such as the marital home.
Pros
Cons
2. Pensions sharing
Pensions sharing is, as the name suggests, where pensions are split immediately between the two parties. Each party is now in a position to do what they like with their share.
Either the share is transferred into the recipient's pension or they join the scheme where the pension came from. This will depend on the pension provider's way of working.
In this situation, the court issues a PSO (pension sharing order) outlining how much of the pension the ex will receive.
Pros
Cons
3. Pensions attachment and earmarking orders
This method differs from the other two in that it doesn't provide a clean break with your ex. When one party's pension comes to be paid out, a portion of it is redirected to the other.
Pros
Cons
So far, we've looked at what can happen if you divorce or dissolve your civil partnership before retirement. If this happens after retirement, things are a little different.
What happens to pensions if you divorce or dissolve your civil partnership after you retire?
Things can get a little complex here. It's in your interests to get advice from a solicitor to ensure that the pension is valued and split fairly.
Your State Pension will be part of the calculations. If you reached State Pension age after 5 April 2016 then this will be based on your National Insurance contributions – and can't be shared in the event of divorce.
If you're a man born before 6 April 1951 or a woman born before 6 April 1953, then you could get an Additional State Pension on top of your basic State Pension.
In the event of divorce or dissolution, the court can decide that your Additional State Pension should be shared.
What about death benefits?
If you're financially dependent on the pension holder or haven't divorced, you might be entitled to a pension
when they die. This will depend on the rules of the pension scheme in question.
Whether it's amicable or not, divorce is always stressful and agreeing on a financial settlement can be complicated. While it's possible to arrive at an agreement independently, the complexities of your pensions mean that it's often best to seek legal advice. That way, you have a trained solicitor ensuring that the settlement is fair.
Are you in the process of getting a divorce or dissolving a civil partnership? At Milners, we pride ourselves on being knowledgeable and offering no-nonsense legal help. If you need
family law advice, please don't hesitate to
get in touch.
Pontefract Office
9A High Street
Upton, Pontefract
West Yorkshire
WF9 1HR
Darlington Office
Close Thornton Solicitors
31 Houndgate
Darlington
DL1 5RH
Authorised and regulated by the Solicitors Regulation Authority – Milners, SRA # 52317 | VAT number: 170144301
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Harrogate Office
11A Princes Square
Harrogate
North Yorkshire
HG1 1ND
01423 530 103
Darlington Office
Close Thornton Solicitors
31 Houndgate
Darlington
DL1 5RH
01325 466461
Pontefract Office
9A High Street
Upton, Pontefract
West Yorkshire
WF9 1HR
01977 644 864
Authorised and regulated by the SRA, SRA ID 52317
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