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21 July 2014

Pension sharing upon divorce

Often pensions can be one of the most valuable assets in a divorce or civil partnership dissolution after the family home. Steeles Law family law team explains the basics of pension sharing upon divorce.

In England and Wales, upon divorce/dissolution of civil partnership, any pension and pension rights that the parties have must be taken into account.  This includes state, workplace schemes and personal pension plans.

In order for pensions to be fairly considered, the first step is to find out the overall value of any pensions.  Therefore, both parties would be asked to obtain the following:

  1. the cash equivalent transfer value for any work pension schemes;
  2. the cash equivalent transfer value of any personal pension schemes; and
  3. the value of each party’s additional state pension (part of the state pension that is not the basic state pension).

For salary related pension schemes, such as final salary schemes, we would always advise our clients to seek expert pension advice early on, as obtaining an accurate valuation can be complex.

There are various options for pension sharing, with the most common one being a pension sharing order.  This is where one party is awarded a percentage share of any one or more of the other person’s pensions.  This share is generally transferred into a pension pot of their own, which could be one that they already have or they could set up a new scheme.

In addition to the sharing of private and work pensions, in some cases, a party’s basic state pension may be improved by using the National Insurance contribution record of their former spouse.  Until very recently, this was a common way for wives (without a full National Insurance record) to boost their state pension.  However, in May 2014, the Department for Work and Pensions changed the rules and for many, it is no longer a possible option.

Another method of pension sharing is for the additional state pension to be shared.  This is part of the state pension scheme which is not the basic pension.

“As we always advise our clients, every single case is different and pension sharing is not always relevant, such as in relation to short marriages.  Even with long marriages, pension sharing is not always the best way forward and it could be that one party retains more property or assets whilst the other retains their pension.  It really depends on the circumstances of every case.  Where pensions are involved, we would always advise our clients to seek specialist pension advice in order to ensure that they are best placed to make the right decisions for their future, and to ensure they have no regrets later in life.”

How can the Family Law Team help you?

The Steeles Law Family law team take a down-to-earth, sensitive approach to family law matters. If you would like to take legal advice with regard to divorce or separation our specialist family lawyer will be able to advise you how to protect yourself and your family for the future, please email using family@steeleslaw.co.uk or by calling 01603 598000.

*The information provided in this article is designed to provide useful information on the subject, not to provide specific legal advice.

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