If you are going through a divorce, there are many things you will need to consider. Among concerns about children, living arrangements and financial settlements, many people often forget that they may need to consider how divorce will affect their pension. Your pension may be the most valuable asset you have, and although it may be some time before it will be paid, you and your spouse will need to take clear advice on the options available to you about how your pensions will be divided. In this article, we provide an overview of how your divorce might affect your pension and potential options for moving forward.
Will I need to share my pension after I get divorced?
Whether you will need to share your pension will depend on the specific circumstances of your case. The court may make orders in relation to pensions, but it can choose to make no order at all. If you were only married for a short time or you are early in your career and have only accrued a small pension pot, the court may decide that it is not appropriate to make an order concerning your pension.
How can pensions be shared in divorce?
If the court decides to make an order in relation to your pension, there are three options for how your pension may be divided. Each of these is set out below.
Pension sharing orders
The court has the power to simply divide your pension at the time of divorce. When the court makes a pension sharing order, a portion of one partner’s pension is removed from their pension pot and put into a separate pension pot in the other partner's name. The benefit to a pension sharing order is that both parties have control over their own pension, giving them a ‘clean break’.
When is a pension sharing order used?
A pension sharing order is the most common type of pension provision made during financial settlement. Even if you and your spouse both have separate pensions already, or you have multiple pensions, the court may make an order in relation to each pension. Typically, the court will seek the advice of a pensions and divorce expert to carry out the calculations necessary to ensure the pension is divided fairly.
Offsetting pension values
Another option the court has for the division of pensions is to offset the pension for another asset. In this circumstance, one spouse would keep all of the pension pot, and the other would receive another asset to offset the pension amount. This could be, for example, the family home or a lump sum of cash. The calculations for offsetting a pension can be complex and, as a result, the court would typically seek the advice of a divorce and pensions expert to determine an appropriate amount or asset for the offset.
Pension attachment order
The third option is a pension attachment order, but these are not commonly used following the introduction of pension sharing orders in 2010. Under a pension attachment order, once a pension becomes payable, a certain set amount will be paid from the pension directly to the other spouse. The biggest issue with a pension attachment order is that the capital in the pension will remain part of one spouse's pension, so the other has no control over the drawdown or how it is invested.
In addition, a pension attachment order ends in the event of remarriage or death, so there is a risk that the other spouse will never benefit from the pension. For example, if your former spouse remarries a few years after the divorce, the pension attachment will end, and you will not receive payments from the pension.
The most important thing to remember is that a pension is a valuable asset - in many cases, even more valuable than your family home. You should seek advice from an experienced divorce lawyer and may wish to seek independent financial advice from a pensions expert.
Contact Lewis Nedas Law - Divorce and Family Lawyers in Central London
Our family law team understands how difficult it can be to go through a divorce. At Lewis Nedas Law, we will guide you through all of the practical matters related to divorce, including any financial circumstances, to ensure you can move forward with minimal stress. If you are concerned about your pension during a divorce, speak with a member of our qualified team today to see how we can help. Get in touch today by calling 020 7387 2032 or complete our online enquiry form.
