When married couples separate, the dissolution of the marriage is designed to be a relatively simple procedure, which is likely to further simplify once no-fault divorce is brought into law.
With divorce comes the need to resolve the issue of financial arrangements, including the matrimonial assets which are generally built up during the marriage. This may include the matrimonial home and any other properties such as a holiday home, any business interests, savings or investments and, interestingly, pensions.
Here, Diane Matthews, who is a family law specialist with particular expertise in resolving financial disputes for married and unmarried couples, explores what happens to pensions on separation.
A valuable asset
Pensions are often the most valuable asset to be considered on divorce, particularly if one or both of the parties are members of a final salary/defined benefits pension scheme.
These provide specific benefits based upon salary and service as opposed to a money purchase arrangement where a scheme member will receive benefits retained in a pot into which contributions have been invested over time.
There are several different types of pension and they include complicated investment schemes which are normally out with most people’s understanding and due to this, may cause significant confusion. Those who do not seek guidance from an expert can therefore find themselves at risk of under-settling, therefore expert advice is imperative.
Benefiting from a spouse’s pension
There are various options available to the spouse who is a non-pension member, who may benefit from their spouse’s pension fund built up during the relationship, including pension sharing, attachment orders or offsetting against other assets such as savings or equity in the marital home.
The option of offsetting should be approached with caution. It is extremely difficult and parties may easily underestimate what a pension fund is worth, running the risk of accepting a smaller cash sum now rather than a specific portion of the pension fund designed to provide an income on retirement for the remainder of a recipient’s life.
We frequently suggest seeking advice from an actuary – a pension expert, who will be able to provide a detailed report illustrating the different pension needs of the parties and the options open within the court process to meet these needs.
Such reports assist the court, the parties and their legal representatives on how issues relating to pensions should be resolved in a sensible and fair manner. It is very important, from the start of proceedings, to ensure that the correct questions are asked about pension provision and the situation is clear to ensure that your interests are protected.
Considerations
The court will consider several different options when deciding how best to deal with pensions and other assets.
The value of the pension will be looked at, together with length of service and the value of the other matrimonial assets. It is important to note that no two situations are the same and it is important to obtain good quality legal advice to enable you to understand this complex area and to assist you in making sure that your needs are met.
Diane Matthews is a legal executive based at WHN’s Blackburn office, specialising in in divorce and separation, including the dissolution of civil partnerships and the associated financial consequences. To contact Diane, call her on 01254 272640 or email diane.matthews@whnsolicitors.co.uk
