Pensions & Divorce

If you are facing the end of your marriage or civil partnership it is really important not to overlook pensions. Divorce is one of the most stressful and painful times people go through. Adding pensions into the mix can be daunting, but not dealing with pensions can be a huge mistake. A guide from Advicenow.org help you deal with any pensions effectively, and with as little stress as possible. Sometimes people talk about splitting pensions or pension sharing on divorce. These terms can be confusing. The guide will explain what the law says on pension sharing or splitting. It will take you step-by-step through what you need to do to reach an agreement, sometimes called a ‘settlement’. It also tells you what other help is out there so you can plan for the future.  

The guide prepared by advicenow.org explains the following: 

  • The different types of pensions there are, and why these matter when you are divorcing.
  • What the law says about pensions when you divorce.
  • What you need to do to find out what your pensions are worth.
  • When it is essential to get expert advice if you possibly can.
  • What to do next when you have worked out what the pensions in your case are worth.
  • How to come to an agreement, and then get that agreement turned into a pension sharing order or other type of order.
  • What to do if you cannot agree.
  • How to find more help and advice to plan your future.

Divorcing parties are obliged to obtain the Cash Equivalent Value (CEV) of their pension in Financial Remedy proceedings. Where a couple have had the marriage dissolved, a spouse may lose their spousal benefits in respect of any pension scheme of the other party. It is for this reason that frequently the divorce should not be finalised until the finances have been dealt with.

Aside Pension Sharing, there are other remedies such as

  • offsetting and
  • Attachment orders.
Pension Sharing:

Pension sharing is one of the options available on divorce or the dissolution of a civil partnership. It provides a clean break between parties, as the pension assets are split immediately. This means that each party can decide what to do with their share independently. Pensions are incredibly complex. During my very acrimonious divorce, the court ordered an appointment of an Actuary (A pensions expert) to work out the options for dividing the Pension pot. They are not cheap to employ. It cost  £2,000 + VAT to employ a court recommended Actuary. You may want to ask your solicitor if they could you let you know what needs to be done for implementing Pension Sharing once the order has been finalised, and how long would this take. Consult an IFA (Independent Financial Advisors) to check whether considering an annuity or a % pension funds are transferred to you. Sometime the IFA may advise that as choosing a provider for an annuity will require time and understanding they may opt to advise a transfer of funds.

There are various ways to share the pension: (see link below “Pension sharing”)

  • Pension attachment/Earmarking,
  • Pension Sharing and
  • Pensions offsetting
Duxbury calculations:

The Duxbury calculation attempts to work out a lump sum that will be used throughout the life of the former spouses and could, in theory, be drawn in equal installments for the rest of their life. If the calculation has been made perfectly then there would be nothing left at the exact time of death

This calculation takes into account the sex, age and amount needed each year to produce a figure which is intended to provide a single lump sum to meet a party’s needs, usually for the rest of his/her life.

The Duxbury tables are found usually in large libraries e.g. the Institute of Chartered Accountants library. In London, the British Library or the City Business Library

 

A pension sharing annex allows you to receive a share of your spouse’s pension. It is an instruction to the trustees of a pension scheme to pass a ‘pension credit’ from the scheme member to the spouse
see the link : Pension Sharing

 

Pensions on Divorce – what should you do? (short film)

 

A Guide to the Treatment of Pensions on Divorce

The Report of the Pension Advisory Group – 2019