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Divorce and Pensions
On divorce, the parties are required to provide full financial disclosure which includes information regarding any pension provision.
Pensions can be valuable assets and are often overlooked by the parties when they informally have discussions about finances on separation which tend to concentrate on income and capital particularly the family home.
Pensions are a complex area, and specialist legal advice should be sought.
Fund values should be obtained in respect of pension funds, whether they are private or occupational, in payment or not in payment. If pensions are significant, it may be appropriate to instruct an Actuary to provide a report which will give detailed calculations which could include how to equalise pension income.
There are three ways in which a pension can be dealt with:-
1. Pension Sharing Order – This an order made in Divorce or Civil Partnership Dissolution proceedings whereby a percentage of a pension is transferred to a Spouse. Where the pension fund is a public sector pension, the public sector pension will be reduced in proportion to the stated order and the Spouse receiving the benefit will receive a pension credit and become a member of that public pension scheme in their own right. In respect of other pensions such as private pensions, there may be an option to transfer the pension credit to a new scheme and you would be recommended to seek specialist pensions advice from a financial advisor if this is the case.
2. The value of the pension is offset against other assets. Pension funds however are not treated the same as available capital and there is no set formula. Offsetting works by taking the value of one parties pension provision and setting it off against other assets and the rest of the settlement is adjusted to reflect that one party has greater pension provision than the other. Difficulties can arise in deciding the value to place on the pension rights because pension funds are not directly comparable with other assets. It is often recognised that cash in hand is of greater value than future income payable over an extended period.
3. Attachment Orders. Attachments Order will specify a percentage of the pension payment to be paid to a Spouse. This is like a maintenance payment directly from one persons pension pot to their former Spouse or Civil Partner. Under this arrangement money from a tax free lump sum can also go to the former Spouse or Civil Partner. Percentages apply to pension rights earned after the divorce as well as before. Attachment Orders however cease on the death of either party or if the party receiving the payment remarries. Attachment Orders, unlike Pension Sharing Orders, can be varied after divorce if the circumstances change. Attachment Orders are not usually recommended, primarily because they cease on remarriage or death.
Caroline Ryan of Tozers Solicitors has extensive experience in dealing with pensions, both private and public sector. Public sector pensions include police pensions, fire service pensions, armed forces pensions, teachers pensions, NHS pensions, Local Government pensions and University Superannuation schemes.
Caroline has extensive experience in instructing pension actuaries and can recommend specialist pension, financial advisors. A discounted rate is available to public sector employees.
For further information or to arrange a free initial meeting, please contact Caroline Ryan who is part of the family law solicitors team at Tozers Solicitors on 01392 204646 or email@example.com.