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What happens to pensions on divorce?

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In a divorce, pensions are often the biggest asset a separating couple has to consider after the family home. A fair approach to pensions on divorce is, therefore, essential to make sure that an equitable division of assets can be agreed upon that meets both spouses’ future needs.

Understanding your pension rights after separation and how this may be decided can help to set your expectations and make sure you secure a fair settlement.

In this blog, we cover your entitlement to your spouse’s pension in divorce, how pensions can be split in divorce, how this might be calculated, options to protect your pension and how the division of pensions can be decided.

It should be noted that this blog is not intended as legal advice about divorce and pensions – it is for educational purposes only. Should you wish to discuss your specific situation, our divorce and separation solicitors will be happy to answer any queries you may have.

For expert pension advice about divorce, please call one of our offices in Banbury, Bicester or Rugby, or simply fill out our enquiry form and we’ll get back to you as soon as possible.

Am I entitled to my husband's pension if we separate?

In a divorce, pension rights are very important. You may be entitled to a share of your spouse’s pension when getting divorced, depending on the circumstances.

If you have no pension or a much smaller pension than your spouse, then securing a share of their pension may be the only way to ensure your future financial security. The good news is that, in general, pensions are considered marital assets, so their value would normally need to be considered as part of the division of assets.

Factors that may affect whether you can claim a share of your spouse’s pension could include your reasonable financial needs whether a share of your spouse’s pension would be needed to meet those needs and the length of the marriage.

It is sensible to get expert advice on pensions and divorce at an early stage so you are clear about your position.

How are pensions split on divorce?

There are three options for dealing with a pension in a divorce settlement or court-ordered division of finances. These are:

Pension sharing – This is where you receive a  percentage of your spouse’s pension pot. This will then be placed into a separate pension for your sole benefit, giving you your pension income.

Pension offsetting – This is where your spouse keeps their whole pension in exchange for you receiving a larger share of other assets to an equivalent value, such as the family home.

Pension earmarking – This is a rarely used option, where a percentage of your spouse’s pension income is paid to you on an ongoing basis. This requires a continued financial tie between you and your former spouse, which is one reason this option is less popular.

How is pension sharing calculated in a divorce?

Pension sharing on divorce is calculated on a case-by-case basis, depending on factors including the size of the pension and the reasonable needs of each person. The other assets available will also need to be taken into account.

It is worth bearing in mind that the length of the marriage and when the pension assets were built up may also be a factor in your pension rights after separation. For example, if the pension pot was generated before the marriage, there is a chance it may not be considered a marital asset and might not need to be included in a divorce settlement.

How to protect your pension in a divorce

If you are concerned that in a divorce a pension payout to your spouse may be required, there are steps you can potentially take to mitigate this risk.

First, you could make a prenuptial agreement (if you are not yet married) or a postnuptial agreement (if you are already married) that specifies your pension would not be included in any divorce settlement. However, this cannot be done if you are already planning to divorce or in the process of doing so as any agreement made a short time before your divorce would be unlikely to be considered legally robust.

If you are already in the process of divorce, then your best option to protect your pension is a negotiated settlement. This would allow you to prioritise keeping your pension in your divorce settlement, for example, by agreeing to let your spouse keep the family home in exchange.

How to decide the division of pensions in divorce

The division of assets, including pensions, in divorce can either be decided voluntarily between the separating spouses or it can be decided by a court.

Most people will be able to decide the division of pensions on divorce through constructive negotiation either inside or outside of the Court environment.  What is important to understand is that a pond of penion money can have less value than a pound of money in other assets such as cash or property.  Specialist legal advice is needed to help you understand and negotiate this. Such an agreement can then be made legally binding by applying to a court for a Consent Order.  Pension Sharing arrangements are unable to be implemented without a court order so it is important that one is obtained.

If you cannot agree on matters related to pensions and divorce, or other financial issues, then you may need to apply to a court for a Financial Order. This means the court will decide how your assets should be divided which can be an important step if one party is being unreasonable or has over inflated expectations.

Get expert divorce and pensions advice in Banbury, Bicester, and Rugby

If you would like expert help with pensions and divorce, please get in touch with a member of our team. We can also assist with any other questions or concerns you may have about divorce and separation.

We have offices in Banbury, Bicester and Rugby working with clients across Coventry and Warwickshire, the West Midlands, Oxfordshire and nationwide.