What rights do I have regarding pensions in my divorce or dissolution of a civil partnership?

When going through a divorce or dissolution of a civil partnership, there are many important things to consider and one area that often requires careful attention is the question of what will happen to any pensions.

It is helpful to think of your pensions as your future security; savings you have built up over the years to provide for you both in your retirement which you had been planning to spend together. One person may have been able to build up a bigger pension pot as they concentrated on their career, while the other person sacrificed earning and saving opportunities to focus on caring responsibilities. 

When we talk about pensions on divorce or dissolution and how to divide them, it is not always as straightforward as splitting a bank account.  Because you and your spouse built your lives together, the law recognises that these pensions are often considered a joint asset, so something you both have a stake in.

A dispute can arise if the person with the larger pension pot does not see this as a shared asset.

Am I entitled to a share of my spouse’s pension?

Pensions built up during the marriage are usually considered marital property, regardless of whose name the pension is in. this means that they are considered as part of the financial settlement.

It is important to understand that this does not automatically mean there will be a 50:50 split. The courts will consider all of the relevant factors before deciding how those pension assets should be fairly divided, such as:

• the length of the marriage;
• respective ages;
• respective financial needs;
• contributions to the family;
• income and future earning capacity; and
• the value and type of pension pots on both sides.

A particular consideration for the court would be whether there is a significant disparity in your respective pension pots, and if the party who has less in the pot has the ability to build theirs up or not.

What specific pensions information do I need to give to my solicitor?

There are different types of pensions and we will need to consider all the schemes you each have in place.  For each pension scheme, you can start by providing the following:

• pension scheme provider’s name and contact details;
• policy or membership number;
• the type of pension scheme – e.g. personal pension or SIPP?
• the cash equivalent transfer value (known as CETV or CE value);
• the most recent annual pension statement – you should have this for your pension arrangements and it would likely contain all of the information points above;
• start date of the pension; and
• accurate details of when your marriage began and ended.

If you do not have an annual statement, there is a specific form that your solicitor can complete and send to the pension company for the relevant details.

Once we have gone through all the information in relation to the pensions, we will provide advice about whether further details are needed and/or whether expert advice is required from a pension expert, referred to as a ‘Pension of Divorce Expert’. For example, the exact value of a defined benefit pension is not usually reflected in the cash equivalent transfer value because those pensions depend on things like your salary and length of service, not just how much you put in. In such a situation, it may be appropriate to ask a pensions expert to provide an in-depth report on the pension scheme and advise on its actual value. Pension experts can also be asked to consider all of the pension schemes that parties have and advise on the pension share that would be required to achieve a certain outcome, such as equality of income on retirement.

We lived together before marriage, does that count?

Cohabitation before marriage is relevant if it leads seamlessly into marriage. This time spent living together will count as part of the overall duration of the relationship for the purposes of the marriage or civil partnership.

The court has a wide discretion in achieving fairness, especially in a ‘needs case’ which is where all assets may have to be put into the pot, whether accrued during the marriage or civil partnership, or otherwise, to meet the reasonable needs of both parties.

How does the court divide a pension?

There are three main ways the court can divide a pension on divorce or dissolution, to achieve a financial settlement. These are:

1. A pension sharing order – often this is the preferred method as it can help achieve a clean break so you are not financially tied to your former spouse. It is essentially an order telling the pension provider to carve out a portion of one spouse’s pension arrangement, and transfer that to the other spouse. Some providers offer the option to have a separate pension plan with them, or you can choose to invest your share with a different pension provider.
2. A pension attachment order – this is less common as it keeps parties tied to one another. The pension would fully remain in one spouse’s name and the provider would be told to pay a portion of the pension benefits (income and lump sum) to the other spouse. There would be no separate pension plan for the receiving spouse and a lot would still depend on the other party. A clean break would not be achieved.
3. Pension off-setting – this approach achieves a clean break without directly sharing the pension if there are sufficient other assets. Once a value is agreed for the relevant pension(s), you can decide to off-set your portion against other available assets. For instance, if your spouse had a pension worth £200,000 and it was settled that you had a claim for 50% of it, but you preferred to keep the matrimonial home instead of having a pension share, you could offer that your spouse retains their pension in exchange for the property being signed over to your sole name. This would only work if your spouse’s settled share in the property matched your pension claim. This would help to achieve a clean break.

How we can help

When going through a divorce or dissolution proceedings, settling the finances is always the most stressful element. Pensions are complex arrangements by their nature and it is important that you seek advice from one of our experienced family law specialists at the earliest opportunity to guide you in the best direction.

For further information, please contact our Family Law Team on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email law@warekay.co.uk.