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Peter Jones
Jones Myers Founder
11:50 AM 10th February 2021
family

How Does Pension Sharing Work In Divorce?

Pensions - which play a vital role in deciding financial claims on divorce - are often one of the most valuable assets of a marriage.

Financial disclosure - a full statement of your current earnings and assets - aims to protect you both. It also looks to ensure that you each receive a fair settlement which may well include a division of the pension benefit fund. 

Pension sharing - which provides a clean break between parties, as the pension assets are split - has been given more prominence in recent years. It recently hit the headlines when a BBC Producer lost her court case to reduce her unemployed ex-husband's 33% share of her £2 million fortune.

In this particular case, The Court of Appeal reaffirmed that pension sharing is appropriate when deciding on the allocation of capital. 

Judges took into account the length of the marriage and discounted the former wife’s allegation that her ex-husband had made a 'significantly negative' contribution to the family fortune during the marriage.

They also upheld an earlier ruling and said the original £733,650 and pension share he was awarded would meet his 'needs'. 

The criteria in considering a pension share requires the pension fund to be valued and included in the list of the family’s assets.  

The receiving party needs to decide if it’s better for them to receive a percentage share or, in some circumstances, seek a greater share of the liquid capital as a “set off” when not pursuing a share of the pension.

Some divorces may entail several pension arrangements so it is important you think about which arrangements should be shared. Expert advice from an Independent Financial Adviser is necessary to ensure the correct pension(s) are shared and to what extent. Advisors will also assist with the valuation and projected future incomes.

The pension share may be internal (when the recipient becomes a member of the scheme) or eternal when the share must be invested in an existing or new arrangement of the receiving party. Utmost care should be taken to obtain details of the cost of any transfer.

The court will look at the needs of the parties and take into account what other assets are available for distribution.

Agreed financial settlements avoiding Court can also be decided through alternative processes including Mediation where an impartial third party “the mediator” helps you discuss issues confidentially and find workable agreements.

There is also Collaborative Family Law where a “no court” agreement is signed at the beginning of the process so that there is a shared commitment to finding an agreed resolution

Another option is Arbitration where a Family Law Arbitrator in the role of a ‘judge’ decides the outcome of divorce financial settlements. As one of the first UK Family Law Arbitrators qualified to decide the outcome of financial and property disputes, I am arbitrating on an increasing number of cases which often include pension arrangements.

With Mediation, Collaborative Family Law and Arbitration, once there is agreement (or an Award) details are submitted to the court for an order which enables a pension share to be implemented.

Sadly, going to Court is necessary in some cases. Before making any decisions we recommend that you consult an experienced family lawyer who can advise on the most appropriate route for your individual situation.