Helping clients reach an agreement about the fair division of matrimonial property on divorce or dissolution can be a complex matter and the value of the parties’ pension savings can often be the biggest asset after the family home. There are several options available regarding the splitting of pension savings and it is important to consider all of these options before deciding what is best for you. Parties should start by valuing their respective interests. The cash equivalent transfer value (CETV) of any pension interests as at the separation date is required. The CETV requires to take into account the period of marriage only and therefore it will have to be apportioned appropriately by the pension provider. The pension provider may charge a fee for the valuation although they usually allow the owner of the pension one free valuation each year. It is important that the correct information is requested first time to avoid any unnecessary valuation fees at a later date.
The options available to you are as follows:-
1. Pension sharing – you receive a share of any one (or more) of your ex-partner’s pensions. This is either transferred into a pension scheme in your name or you can join your ex-partner’s pension scheme. If the pension is transferred to you and you don’t already have your own pension you will have to set one up.
2. Pension offsetting - the value of any pensions is offset against other assets for example, you may get a bigger share of the family home in return for your ex-partner keeping their pension.
3. Pensions earmarking – you get some of your ex-partner’s pension when it starts being paid to them. You can get some of the pension income, the lump sum or both but you can’t get pension payments before your ex-partner has started taking their pension.
If you and/or your ex-partner have retired, pensions can still be split but the rules are different. It isn’t possible to take a lump sum from your ex-partner’s pension if they are already receiving income from it. This applies even if your ex-partner took a lump sum.
Only a Court can make a Pension Sharing Order or a Pensions Earmarking Order. You can carry out pension offsetting without a Court order.
You should always seek detailed advice from your solicitor as the rules for pensions on divorce or dissolution are complicated.