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IT is vital to take expert legal advice in relation to the impact of divorce on finances so your pension is protected.
The UK currently holds £15.2 trillion in household wealth. Private pensions represent the biggest single component of this, at around 42 per cent (£6.4 trillion).
Agreeing a fair separation of this pension wealth at a time of divorce will be critical to the future financial well-being of both parties.
The court’s objective is an outcome as fair as possible in all circumstances. The court can make the following orders in relation to pension claims:
Pension Sharing Order: This is the most common type of pension order and will set out what percentage of a pension fund should be transferred from one spouse or civil partner to another.
The advantage is it enables a clean break between the couple.
Pension Attachment Order: This is an order where either part or all of a spouse or civil partner’s pension benefits ae redirected to their former spouse or civil partner at the time that the pension comes into payment on retirement. However, if the spouse dies before the pension comes into retirement the former spouse will not receive any benefit, which is why these types of orders are rare.
Offsetting Order: This is an order where one party will retain their pension to achieve a fair outcome and the other spouse or civil partner will retain more of the non-pension assets, such as the former family home or investments.
Deferred Lum Sum Order: This order retains any pension funds but both parties will receive an agreed lump sum at the time of either pension member’s retirement.
Each case will depend on the age of the couple, the value of the pensions and the type of pension scheme each party holds.
The starting point is to seek full and frank financial disclosure of each parties’ income and capital position, including pensions and the cash equivalent transfer value [CETV] and details of any benefits under each pension scheme.
It is always advisable to take expert advice from a pension or divorce expert or actuary. They will advise the best way to achieve equality of capital value, pension income upon retirement or any benefits from the pension provision.
It is important in the first instance specialist advice is obtained from a family solicitor.
In the absence of a legally binding financial court order, either spouse or civil partner can make a claim against the other’s finances, regardless of how long they have been divorced or even if they have remarried.