What Happens to your Pension in Divorce?
Pension Sharing in Divorce
One asset that’s often forgotten about in divorce is a pension. Surprisingly a pension is often the second biggest asset and is one that can be very valuable.
Many earn a pension throughout their whole working life, saving thousands to help provide a stable income when retired.
Because this asset is not something that you can necessarily see like the marital home or the cars on the drive, it is therefore often left out of discussions.
It’s very important to know that a pension is classed as an asset and is treated just like everything else. This can be easily split up between the 2 soon to be ex-spouses.
In the majority of households, one spouse is the primary ‘breadwinner’ and the other gives up their career to look after the children and marital home. Often the primary breadwinner is very reluctant to give up their pension due to them being the one who has earned it. However, the judge sees dedicating your life to bringing up the family just as valuable.
Ways in which you can split a pension in the UK
There are three ways you are able to split a pension in divorce and these are;
- Pension sharing
- Pension offsetting
- Pension attachment
Pension sharing is one of the most common ways to split a pension. It simply means your pension is split between a couple. The recipient will receive their share of the pension and be transferred into their own pension pot.
Pension offsetting is when the value of the pension is discovered and is then offset against another asset of the same value. This is commonly used if the pension scheme member wants to keep their pension and there is an asset of similar value.
This is how you could protect your pension if you wanted to.
Pension attachment is where the pension scheme member is asked to pay a percentage of their pension to their spouse. The pension share is only available when the pension is available to the pension scheme member, normally when the pension provider retires.
Have any questions? Please do not hesitate to contact us! One of our friendly and professional advisors will be more than happy to help you.
How to find out what it’s worth
Before you are able to divide a pension you need to find out how much its worth. This can be quite complex depending on what type of pension you have.
Workplace pensions tend to mean you pay a set amount into a pension pot. If this is the case, your annual statement will give you a transfer value.
If you have a final salary pension scheme you will need to seek advice from a financial advisor. They tend to be based on how much you earn and not by set amounts which makes it more complex.
If it’s a public sector pension then you will need to ask for a cash equivalent transfer value (CETV). You will need to ask your pension scheme for this directly and you may have to pay a fee for doing so.
Personal Pensions tend to be a little easier, you will need to look at your annual statements, this will give you a transfer value.
When can you claim your ex spouses pension?
A pension sharing order is made when you file a financial consent order. A financial consent order is vital in divorce as it not only allows a clean break from your ex spouse but it also stops them being able to claim more assets from you years later.
You are able to claim your ex spouses pension once you have divorced and are creating your financial consent order. A financial consent order is recommended as part of the divorce process however you are able to create one at any point after a divorce.
One question we get asked a lot here is ‘can my ex spouse claim my pension even though they’re re-married?’
The answer is yes, if you did not create a financial consent order or clean break order when you divorced then they could still make a claim against your pension. The re-marriage trap works on other assets like property and savings but unfortunately not on pensions.
The moral of the story is ALWAYS get a financial consent order after divorce no matter how amicable you are.
Online pension sharing orders
You may be able to obtain an online pension sharing order. This will save you hundreds compared to a high street solicitor. Many believe their only option is to pay a large fee but you are actually able to include pension sharing in a financial consent order.
Find out more by talking to one of our professional advisors today on 01793 384 032 or alternatively use our live chat feature below.