The importance of pensions is often underestimated. In many of our cases, pensions are a significant asset. They can be central to your future financial security. The first step is to check that the value given to the pension fund is accurate, secondly we have to understand how funds can fairly and effectively be shared between parties. We work closely with specialist pensions advisors who can help with this.

There are a number of different ways of sharing a pension upon divorce or dissolution. It is important to consider how the pension should be taken into account and the impact this will have on the financial futures of you and your spouse. Usually a pension order is obtained which separates the funds so that your own fund is created from the pension of your spouse. If your priority is to receive more capital in lieu of future pension provision you will need advice about this.

Before deciding how best to deal with a pension we need to understand various issues - what will the income be upon retirement? How can the pension be shared in the most tax efficient manner? Which pension ought to be shared and by how much? These are all questions which we and our trusted team of pension advisors can help you with. Pensions are complex assets and specialist advice is crucial in ensuring that you make the right decisions.

1. How are pensions split on divorce?

If pensions are to be shared on divorce, the court will make an order for a pension sharing order. This is where the whole or a proportion of one party’s pension is taken out of their pension fund and transferred into a separate pension fund in the other party’s name. The result is that both parties have completely separate pension funds that will pay an income to them on retirement. In some circumstances your fund will stay with the original provider, in others it will transfer to a different provider.

2. I only paid into my pension prior to getting married – will I able to exclude this?

It is possible to argue that a pension should be excluded if it is a pre-marital asset but this is a matter for the discretion of the court. It may depend on how long you lived with your spouse before you got married and what pension provision they have.

3. I’m retired and my pension is in payment – can an order still be made against it?

Yes. The only difference is that the receiving party will not receive a further lump sum. Implementation of the pension sharing order will result in a reduction to your income but your spouse may not receive money from the pension themselves if they are not old enough to do so.

4. Will there be an order against my state pension?

The basic state pension cannot be shared. The Additional State Pension can be shared. In reality, it is relatively rare that orders are made against state pensions but they are taken into account when looking at pension provision as a whole.

5. Should I just accept a lump sum payment which is worth about the same as my spouse’s pension?

This may seem like the simplest option but it is extremely important to take advice in relation to this. Pensions are complex assets and there are often hidden benefits. A cash lump sum is unlikely to generate the same income as money in a pension fund. Therefore, unless pensions are small and relatively straightforward, it is unlikely that this will be a viable option. We recommend you seek specialist legal advice in relation to pensions. 

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