Pensions on Divorce

At ORJ we are routinely instructed to advise spouses on their pension rights upon divorce. The following sets out the basics for clients to be aware of.

 

Pension rights are important

The law says that when a married couple divorce and divide their assets, pension rights must be taken into account.

 

What happens to a pension on divorce?

There are three ways of bringing pension assets into account in a divorce settlement;

 

1. Offsetting

A court can compensate a spouse, for loss of his or her former partners pension rights, by what is known as Offsetting.
For example, one spouse may keep the house and the other, his or her pension. However, the likelihood of such an order will depend upon what other assets are available.

 

2. Sharing Order

The court can order a pension scheme to transfer part of one spouse’s pension pot to another; creating a separate pension for the other spouse.

 

3. Attachment / Ear-marking Order

It is open to the court to order that a pension accruing to one partner is paid to the other. However, such orders have drawbacks; the pension remains in the name of the former spouse, who must retire before any income is received. Income stops on death of the former spouse or on remarriage of the spouse holding the benefit of the order.

 

Pension sharing – What are the benefits?

A Pension Sharing Order in a spouse’s favour, means he or she will have a pension. It doesn’t matter if the former
spouse dies or when he or she retires; the new pension share will go into a totally new pension scheme. The pension can be claimed whenever he or she wishes to retire, subject to any restrictions imposed by legislation and the spouse may take a lump sum.

 

However, unlike a maintenance order, a Pension Sharing Order cannot be adjusted, or otherwise varied, once made.

So in conclusion, it is vital to protect pension rights that have grown in a marriage. Cases involving pensions are a complex business, it’s very important that the matter is handled properly and that the relevant expertise is applied.

To arrange a free, confidential discussion with our Stafford-based family law team, please call Mike Vale directly on 07825 058489 or email mike.vale@orj.co.uk