Pensions can be crucial when couples divorce/dissolve especially for those reaching retirement age.
A huge worry for those separating is ensuring they will have sufficient income in retirement, particularly when one of the parties has pension and the other does not, and it was intended that the pension would support both in retirement.
Deborah Marsh, Associate Family Solicitor and Collaborative Lawyer at Wake Smith Solicitors looks at how the family court can assist?
The family court can deal with pensions in three ways:
- Pension sharing: meaning a percentage of one party’s pension is transferred to the other to equalise their pension provision or, provide them with a pension if they have no provision of their own.
- Pension Attachment: meaning that the person with the pension provision provides a percentage of their pension income to the other when the pension is taken, but this is now rarely used, because if the payer passes away, the pension stops being paid to the other.
- Offsetting: meaning that instead of receiving a share of the pension, or an income from the pension, the party receives a cash sum or other assets are transferred to them (such as the family home), to compensate them for not taking a share of the other’s pension. The amount received is generally not the same amount in cash terms as would be received by say a pension share. This is because the receiver is taking the cash amount before retirement whilst the other has to wait or, they can only continue to take an income from their pension. The amount of lump sum the receiver obtains depends on the type and value of the pension fund(s).
Deborah said: “The family court will generally look to deal with pensions that have built up during the course of the marriage/civil partnership however, can if needs require share pensions built up prior to the marriage/civil partnership, and after separation.
“The Family Court, amongst other factors, will consider the age of the parties and for those younger who have many years to build up their own pension provision, pensions may not be a major feature of the parties’ case.
“Pensions can be complex assets and depending on the complexity, and the value of the pensions, it may be necessary to seek the advice of a pension on divorce expert who can advise on how the pensions should be dealt with, to equalise pension income in retirement.
“Depending on the type of pension scheme the values provided can be misleading and lead to pensions being dealt with unfairly both for those receiving a share of the other’s or offsetting or, for the one sharing/offsetting their pension(s).
“The pension on divorce expert will be instructed as a single joint expert by the parties’ solicitors meaning that the expert’s duty is to the court so the parties can be assured of the independence of the expert.
“Similarly, whilst offsetting can seem attractive as it may enable one to remain in the former family home rather than have a share of the other’s pension, this too needs careful thought as the one foregoing the pension share could see themselves with little retirement income, it all being tied up in the former family home.”
Expert legal advice is required on this difficult area of law. To speak to Deborah Marsh call 0114 266 6660.
