It can be easy to think that a relationship breakdown will be easier to negotiate, once the world of work (and the ensuing, more complicated, income and expenditure) has ended. However, like all assets, pensions need to be considered when negotiating a divorce settlement.
The facts
When valuing a pension, with reference to a divorce settlement, each party must acquire the cash equivalent value (CEV) from their pension provider.
When it comes to dealing with any disparities in the CEV, you have three options:
- Pension sharing. This is where a proportion of a party’s pension rights are shared with their former spouse. The party’s rights are reduced by a specified percentage while the former spouse receives the corresponding percentage.
- Attachment. This is where a percentage of party’s pension is paid to the former spouse, whilst the party continues to control the rights. This right ceases on the remarriage or death of the former spouse.
- Offsetting. In this case, the former spouse takes cash in place of the pension member’s rights.
Beware of the detail
Calculating pension value and entitlements can be complicated. Pensions are unique as they are expressed as a capital value for the purpose of divorce proceedings but the intention is to provide an income on retirement. The parties to a divorce should always carefully consider their pensions and they may find it beneficial to instruct a pension actuary to provide specialist advice to ensure that pensions are divided fairly on divorce. It needs to be done with care and accuracy and a specialist in this field, can use their expertise and experience to make sure that the right level of Pension Sharing Order is put in place.
It’s absolutely essential that, if you’re considering a divorce, you get expert advice concerning your pension. You can contact us for anything relating to the above to make sure you’re protected.
