What happens to your pension when you divorce?

When going through the painful process of divorce, your pension may be one of the last things to be taken into consideration. Many people don’t even realise that your former partner can make a claim on your pension savings, even though you may have been only person paying into the pot.

The court may include your pension as an asset to the matrimonial pot, especially if one spouse has been out of the working environment bringing up the children and unable to contribute to their own pension.

Pensions are included as assets in divorce financial settlements even though they are a future benefit.  This is because you will usually have been paying into your pension throughout your married life.
There are three possible ways for the Court to deal with pension rights upon divorce:

1. Off-setting – this allocates one party a greater proportion of the matrimonial assets to compensate for their lack of pension or loss of benefit. This can be appropriate if a pension is inaccessible, for example it’s based abroad or you would prefer to retain the whole of your pension and negotiate higher terms on other settlements such as property.
2. Pension Attachment Orders – requires payments made under the pension to be paid to the spouse other than the member of the pension scheme.
3. Pension Sharing Order – requires the pension scheme to transfer a share of the member’s pension to into their spouse’s pension scheme. This type of order is suitable where both partners would like to have a clean break and is the most common method of sharing the pension funds.The Court will consider the parties’ pensions separately from income and capital, as the funds contained within them will not be readily accessible by the member spouse in the same way as other capital assets or income would be.
   Courts treat pensions as providing for parties future income needs, so where one party has a large pension fund but the other does not the Court can make orders to achieve what it considers to be a fair outcome. This includes the financial needs of each spouse and the children as well as the marriage duration and age of each spouse and taking into account all the circumstances of the case.

When the marriage is short and both partners are young, pension sharing claims are usually dismissed, as any pension provision is likely to have been built before the marriage and both partners have time to build up their own fund of pension benefits.

Pensions are a complex area, and it is highly recommended that divorcing couples seek professional advice before trying to divide a pension.

If you would like further information in relation to Pensions or family law generally, please contact one of our family solicitors at Debenhams Ottaway.