Divorce & Pensions

Pensions are often a contentious issue during divorce. They can be critical to a person’s future financial security, so making sure they are dealt with fairly is essential. Seeking expert help for dealing with divorce and pensions is, therefore, strongly recommended.

Whether you are concerned about getting a fair share of your spouse’s pension or need to protect your own pension during divorce, our highly experienced team can help. We can make sure you fully understand your pension rights during divorce, then work to get the best possible settlement for you.

The team at SMR can assist with issues such as:

Advice on divorce pension rights
Protecting your pension against the risk of divorce with a prenuptial or postnuptial agreement
Options for dealing with pensions in divorce, including pension offsetting, pension sharing and pension earmarking
Protecting your pension during divorce

We know how daunting dealing with these matters can be, especially given how high the stakes might be for your future. Our team will take the time to fully understand your concerns and the outcome you need to achieve, then work closely with you, explaining everything in plain English.

Supporting clients across the whole of West Sussex, we offer a flexible service to match your needs, including, face-to-face meetings, video conferencing, telephone and email.

Speak to our divorce and pensions solicitors in West Sussex

To discuss pensions on divorce and find out how we can help, please get in touch to speak to one of our experts.

BOGNOR REGIS CHICHESTER EAST WITTERING SELSEY

Our divorce and pensions solicitors’ fees

For straightforward advice and services, we may be able to agree a fixed price in advance. For more complex matters involving pensions on divorce, we will typically charge an agreed hourly rate, dependent on the level of expertise required.

If you would like to enquire as to the cost of using our solicitors for pension divorce settlement matters, please contact us and we will be happy to answer all of your questions.

Divorce and pensions explained

What happens to pensions in a divorce?

During divorce, pensions are treated the same as any other assets. This means they must be considered as part of any voluntary divorce settlement or court ordered division of finances.

This does not necessarily mean that you will get half of your spouse’s pension or that they will get half of yours, but it does mean the value of any pension assets that you have will be added to any other assets that need to be divided, such as your family home. This is sometimes referred to as ‘divorce pension rights’.

Exactly what happens to pensions on divorce will depend on the circumstances, what other assets you have and the priorities of each spouse. It is therefore a good idea to get expert advice about pension sharing on divorce before you initiate divorce proceedings or as soon as your spouse tells you they want a divorce.

How are pensions divided in divorce?

There are three main options for dividing pensions on divorce:

Pension sharing
Pension offsetting
Pension earmarking

Which of these options makes the most sense for your circumstances will depend on what other assets are available and your particular requirements. You can read more about the different options below or speak to a member of our team to discuss their relative merits.

What is pension sharing?

Pensions sharing means that the spouse with more substantial pension assets gives a share of their pension pot to the other spouse. The receiving spouse can then take this lump sum and place it into their own pension scheme. Pension sharing on divorce is a popular option, especially for couples who do not have substantial other assets to divide.

The key benefits of pension sharing are that it means each spouse ends up with their own independent pension and it allows them to completely cut financial ties with each other. The main potential downside is that the spouse with a larger pension will be losing some of their future pension income which could impact their future financial security.

What is pension offsetting?

Pension offsetting can be a good option for people who do not like the idea of pension sharing on divorce. It means that the spouse with no or less pension assets takes a larger share of other assets in exchange for giving up their rights with regard to the other spouse’s pension.

Most commonly, pension offsetting will mean that the spouse with the larger pension gets to keep all of their pension while the other spouse will keep the family home, however, this will depend on the exact value of the pension pot, the family home and any other available assets.

Advantages of pension offsetting include that it can provide a fair way of dealing with pensions on divorce that allows a spouse to keep their pension intact while still providing for the other spouse. It also allows a clean financial break between the spouses. Disadvantages include that it can leave the other spouse with no future pension income, which could leave them at risk of financial insecurity later on.

What is pension earmarking?

Pension earmarking is a rarely used alternative to pension sharing and offsetting. It means that the spouse with no or less pension assets receives a percentage of their former spouse’s pension income on an ongoing basis.

Benefits of pension offsetting include that it keeps the pension intact while providing both spouses with a pension income. The very significant disadvantage is that it leaves the former spouses financially tied together indefinitely, which is rarely desirable as it can carry significant risks. This is why pension earmarking is rarely recommended and should only be entered into with extreme caution.

How can you protect your pension in a divorce?

There are various ways you can protect your pension in the event of divorce. Which you should consider will depend on what stage you are at in your marriage.

Before getting married, you can protect your pension against the future risk of divorce with a prenuptial agreement. You can use this to specify that your spouse would not be entitled to a share of your pension if you ever divorced. Obviously, for this to work, you would need your spouse to accept the agreement and sign it. You will also need the agreement to be properly prepared by a legal expert, to make sure it holds legal weight if you ever need to rely on it in future.

If you are already married, you can get the same protection offered by a prenuptial agreement with a postnuptial agreement. This is essentially the same thing but can be made at any point after your marriage has taken place. If you had a prenuptial agreement, but your financial or personal situation has changed since you married, you may need to update the original agreement by making a postnuptial agreement.

If you are already in the process of getting divorced, then your best option for protecting your pension is likely to be pension offsetting (as explained above). This means that you can keep your whole pension for yourself in exchange for giving up your share of other assets, such as the family home.

Something to bear in mind is that you will likely stand a better chance of protecting your pension with a divorce settlement agreed voluntarily as opposed to if court proceedings are needed to decide on the division of finances. This is because a court will be guided only by what is considers fair, rather than your own personal preferences about which particular assets you are more concerned about protecting.

How are pensions valued during a divorce?

Exactly how the pension is valued will depend on the situation. If you have opted for pension sharing or pension offsetting, then the current value of the pension pot will be used.

However, if you have chosen to share the pension income through pension earmarking, then you would normally be taking an agreed percentage of the pension income.

Getting an accurate value of the pension assets is really important when reaching a divorce settlement to help to ensure that any agreement made is fair.

At what age can I collect my partner’s pension?

For private pensions, the age at which you can start collecting a share of your partner’s pension will depend on the rules of their pension scheme. In relation to divorce, this would only apply for pension earmarking, where you would be receiving an agreed share of their pension income.

For pension sharing, where you received a share of your partner’s pension assets to place into your own pension scheme, then the age you start receiving a pension income will depend on the rules of the scheme you entered.