Separating couples often focus on major items such as the family home or business when divorcing, forgetting that pensions can be a valuable asset in a financial settlement.
Often omitted in discussions, especially when couples are not nearing retirement age, a pension can be worth far more than property.
A recent University of Manchester study showed the average married woman aged 65-69 years has just £28,000 in pension wealth, whereas the average man has almost 10 times that.
Lindsey Canning, head of Family Law at Wake Smith Solicitors, explains why pensions matter for divorcees and how pension savings can be split.
“Whether individuals have any pensions is key to any divorce proceedings.
“Pensions, one of the biggest joint assets, are often forgotten by couples when they file for divorce. Even if you are not thinking about retirement yet, the value of them should never be underestimated.
“Women can be left significantly worse-off financially in a divorce where pensions aren’t split. In choosing the family home over a pension sharing order it can leave many women, in particular, little income in retirement.”
Pensions can be dealt with in three ways:
- Pension sharing: where 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 order: the person with the pension provision gives a percentage of their pension income to the other when the pension is taken. This is now rare as if the payer passes away, the pension stops being paid to the other.
- Offsetting: one person keeps their pension in exchange for giving up another asset, such as the family home, however this can be a complex calculation.
According to the latest figures from the Office for National Statistics, pensions are usually the single biggest asset for divorcing couples making up 42 per cent of total household wealth, whereas only 36 per cent of wealth is held in property.
This is a hugely complex area of law and expert legal advice on pensions is required. To speak to Lindsey Canning call 0114 266 6660.
