Expert divorce solicitor, Carol Toulson, looks into the subject of pension sharing on divorce within financial settlements, and explains Pension Sharing Orders.
Pensions are often one of the most valuable assets to consider within divorce proceedings that can often be overlooked or disregarded.
Within divorce proceedings and proceedings for the dissolution of a civil partnership the Court have jurisdiction to make a Pension Sharing Order. A Pension Sharing Order allows a pension scheme to transfer a percentage from one spouse’s scheme to another pension in the other spouse’s name. The receiving spouse may be able to become a member in their ex-spouse’s pension scheme or they may need to set up a new pension scheme. Pension sharing Orders allow pension assets to be transferred within divorce proceedings and still achieve a full and final settlement.
The starting point is that each spouse’s pension provision will be considered within matrimonial proceedings and the starting point is that pensions should be shared equally. A Court can consider all the pensions whether they were accumulated pre-marriage or post separation. However, there are arguments that a spouse can make to depart from an equal division of the pension assets, for example, if this has been a short marriage or there were considerable pre-marital pension contributions by or one spouse considerable post separation contributions.
It is important that both parties obtain full information in respect of their pension provision to include state pensions.
State pensions should always be considered when looking at pensions. There can be significant disparity in respect of both parties’ state pension provisions. Although the basic state pension cannot be shared nor can the new state pension (which replaced the basic state pension and additional state pension from 6th April 2016), you may be entitled to additional benefits as a result of national insurance contributions. An additional state pension can be shared if the spouse entitled to it reached state retirement age before the 6th April 2016. Even if the state pension itself cannot be shared any state pension disparity can be taken into account when looking at private pension provision or potentially spousal maintenance.
You will need to obtain full information in respect of the state pensions whether by actual payments being made or by obtaining a state pension forecast.
To share a pension, you need a Court Order which can be obtained by the Court within divorce proceedings. An Order can be made by the Court or if the parties are in agreement, then an Order can be prepared by solicitors and approved by the Court. Once you have a sealed financial Order containing a Pension Share Order the pension provider must be served with a copy of the Order, pension sharing Annex and Decree Absolute. A Pension Sharing Order takes effect from the date of the Decree Absolute/Final Order or 28 days from the Pension Sharing Order being approved by the Court. The pension provider then has four months to implement the transfer, however, the time limit is subject to receipt of all relevant documentation and fees paid.
If the receiving spouse cannot remain a member of the existing scheme or has chosen to transfer the monies to a new scheme the pension provider will need full details of that new scheme.
The cash equivalent transfer of the pension being transferred is recalculated on the date within the implementation period called the valuation day and it is therefore important that implementation is not delayed. The transfer day is the day in which the Pension Sharing Order takes effect and the spouse receiving the pension credit becomes legally entitled to the same.
Most pension providers will charge a fee for sharing a pension and this can vary between zero to a few thousand pounds. In most cases the fees are divided equally between the parties and often can be taken from the fund itself. Full information in respect of the fees should be obtained when obtaining full information about the respective pensions.
Pension sharing is not the only way to deal with pensions.
The other popular method of dealing with pensions is pension offsetting. In some cases, the parties may wish for one party to receive other assets such as the matrimonial home in return for not making a claim against their pension.
There is also Pension Attachment and Earmarking. This option is less popular than pension sharing because it doesn’t achieve a full and final settlement. A Pension Attachment Order provides for a portion of the lump sum and or pension income to be paid to the other spouse when the pension holder retires based on the fund values at the time.
It is really important to consider pensions in each and every case. Obtain full details of your pension provision and your spouse’s pensions provision not forgetting state pensions.
Your solicitor will advise you with regard to pensions and an overall financial settlement. It may be necessary to take expert advice from a pensions on divorce expert. This can involve additional cost; however, pensions are a very complex area and often the parties will have a number of pensions with difference types of pensions. There are often disparities in ages and long-term goals and needs of the parties. If you obtain full information, you can make an informed decision weighing up all the pros and cons.
If you have any queries or concerns with regard to divorce, pensions or an overall financial Order our specialist family law team can assist you.
Call 01206593933 and speak to a specialist divorce lawyer. Or complete the form below.
A Mackman Group collaboration - market research by Mackman Research | website design by Mackman
