When getting a divorce, there are many things to consider, including how your pension will be divided. However, since a couple will want to prioritise their children and the distribution of larger assets such as property, it is common for pensions to be overlooked or undervalued while settling the finances.
In most cases, the pension funds are not equal in value. This could be due to a difference in the amount earned by each spouse, or in cases with children, where one spouse has taken a step back in their career to raise them.
It is crucial to understand that pension funds could be as important as property or savings in terms of assets as it ensures that both parties are fairly provided for upon retirement.
When sorting a pension within a financial settlement, various options exist. These include:
- Obtaining a pension sharing order
- Offsetting a pension
- ‘Earmarking’ or pension attachment
What is a pension sharing order?
A pension sharing order is a formal agreement that allows you and your spouse to divide pension assets at the time of divorce. In this case, a fixed percentage of one spouse’s pension will be transferred to a new pension fund in the other spouse’s name, allowing each spouse to ‘start again’ and build their independent pension funds.
Another option is to create a clean break between both parties by offsetting the value of the pensions with assets of the same or similar value. For example, if one person has a large pension, the other may get the house if it is of similar value.
Pension offsetting may not be suitable if there are limited liquid assets.
What is a pension attachment order?
Pension attachment orders (also known as ‘earmarking’) involve redirecting some (or all) of a person’s pension benefits to the ex-spouse or civil partner when it comes to being paid. With this option, there is not a clean break. It requires the people involved to maintain an ongoing link with their ex-spouse which may not be ideal in cases where the divorce is not amicable.
Can I share my state pension?
Currently, the state pension stands at £185.15 per week in the UK. It is not possible to share a basic state pension; however, it is possible to share an additional state pension. In this case, there are various options available. All pensions should be taken into consideration when deciding on a financial settlement in divorce.
Divorce Financial Settlement Gloucester
We strongly recommend seeking expert legal advice when going through a divorce to ensure the best outcome for you and your ex-partner, and your children.
At Langley Wellington LLP, we understand that going through a divorce is always tricky without having the added pressure of deciding how to proceed with your pensions. Therefore, our team of empathetic and personable solicitors will help to guide you through the process and select the best outcome for you.
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please get in touch with our team of solicitors