Under the Matrimonial Causes Act 1973 the Court has the power in a divorce or dissolution of a civil partnership to make pension sharing or pension attachment orders. Pension attachment orders have a limited utility so in most cases we will only consider whether a pension sharing order should be made.
Types of pension
There are many different sorts of pension assets and varied rights accruing under different pension schemes, including the state pension. Sometimes pensions can appear to be of similar value but may produce different levels of retirement income. This is a very complicated area in which often reference may need to be made to expert pension advice will be needed.
It is common for people and divorce lawyers to overlook the value of the state pension. This is not an exciting area of law, but it is essential that the values of state pension provision are compared.
What is a pension sharing order?
This means that some or all of the pension funds existing at the time of the divorce or dissolution can be divided with a proportion of a pension(s) being transferred into a fund in the other party’s name.
How to approach pension sharing
The orthodox view of pensions is that they should be treated separately and discreetly from other capital assets as they provide an income stream in the future for retirement. In bigger money cases where needs are comfortably met, the Courts are now less likely to draw the distinction between pension and non-pension assets.
In small to medium money cases where financial needs are the central issue careful examination of the qualities of a pension is usually required. Depending on a range of factors (including the age of the parties and how close they are to retirement) the Court may approach matters on a capital basis or by looking at the income the pension assets might produce and how the equality of income upon retirement can be achieved.
How pensions are valued
The starting point is to obtain a cash equivalent (CE) figure from each pension provider. In order to advise properly, our divorce legal team will need to know what pension rights exist and this information can be obtained by utilising the Pension Enquiry Form – Form P. It can take a long time for information to be provided so we recommend applying for it early.
Great care needs to be taken when assessing the values of pensions, as CE values may be misleading. Company and public sector pensions CE values may not represent the true value, for example a pension may have guaranteed over inflation increases as a benefit, making it more valuable than other pensions.
The Court can make a pension attachment order. The order directs pension managers to provide a percentage of the pension benefits (including any lump sum) to be redirected to the other party. Pension attachment orders are uncommon in practice because the receipt of the benefit under them is far less certain than the receipt of benefits under a pension sharing order. A pension attachment order can be subject to future variation applications and steps being taken by the recipient party beyond the receiving party’s control. The remarriage of the receiving party or the death of the paying party can terminate the order.
Pensions are incredibly important and very valuable assets. The greatest care must be taken in settling terms regarding pensions. We recommend serious consideration is given to seeking expert pension advice from a properly qualified expert – for more information on pension experts click here.
If you have any queries regarding your pension when going through a divorce or separation, please contact our divorce lawyers in Guildford on 01483 451900.