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What happens to pensions on divorce?

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What happens to pensions on divorce?

A pension can be a very valuable asset in a marriage and dealing with it on the breakdown of a relationship can be complex. There are three main ways the pension can be treated:

Pension Sharing – the court has power to order a pension share, where a portion of the pension is taken and invested as a separate pension for the other spouse. In this way both parties’ needs on retirement can be met.

Offsetting – essentially where the parties trade the assets so that one party keeps the pension and the other receives a greater share of other assets, often the family home. This enables immediate financial needs to be met but can leave one party with very little in the way of retirement provision.

Earmarking – where a proportion of a pension is “earmarked” for the non-owning party, although it remains part of the original pension scheme. Earmarking is less common than sharing and offsetting.

Don't forget to include State Pensions when calculating the values of pensions - you can get a forecast by submitting form BR19.

Even when retirement seems a long way off, it is crucial that pensions are not overlooked in negotiations about financial settlement . The value of a pension, known as cash equivalent value, must be disclosed within proceedings. It might also be necessary to obtain an expert report to provide full details of the pension and relevant matters when considering how the pension should be divided. Although this will incur cost, investing some time and money in getting the issue right can pay huge dividends in the future.

Our articles are intended for general information purposes only and are not a substitute for professional advice tailored to your specific circumstances. We are always very happy to discuss any plans, issues or concerns you may have and to clarify how we might be able to help. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.