What Happens to my Pension on Divorce?

In proceedings for divorce or dissolution of civil partnership, the court has the power to redistribute pension benefits between the parties.

Pensions must be noticed in divorce as pension rights often form the second largest asset after the family home. Understanding the full range of options available when dealing with pensions during divorce is important.

There are many types of pension schemes, pension benefits and ways of contributing to and funding schemes.

Both parties must provide financial disclosure in respect of their pension benefits. As part of the financial disclosure process on divorce or dissolution, both parties will have to obtain the equivalent cash value for all pensions.

In many cases, simply sharing pension rights according to the cash equivalent value will not produce a fair result because of the parties' needs, ages, and length of the marriage. It may be more appropriate to consider the percentage split to provide both parties with equal pension benefits on retirement.

When considering redistributing pension benefits, there are several options. The main options are:

Offsetting

Pension offsetting is the process whereby the value of the pension resources is set against the value of other assets held between the parties. In an offsetting case, the pension rights would remain with the pension member, and the non-pension assets would be adjusted because one party would have a less valuable pension provision.

In some circumstances, one party may wish to retain the family home at the expense of receiving a future pension. Great care must be given to offset, and you must receive appropriate advice early on.

Pension sharing

Pension sharing is a method by which an existing pension arrangement is split and divided between the parties. On divorce or dissolution, a court can make a pension sharing order transferring a part of or the whole of a pension from one party to another. A pension sharing order means the person receiving the pension would have a separate pension fund.

Pension attachment 

A pension attachment order requires the person responsible for the pension to pay a percentage of the pension income, lump sum, or death benefits when a pension becomes available to the other party. 

Family solicitors cannot provide financial advice, and you must receive appropriate advice early from an independent financial adviser and pension divorce expert.