Pensions and Marriage Breakdown

For many people, a pension fund is the most substantial asset, apart from the matrimonial home, to be considered on the breakdown of the marriage or civil partnership. On divorce or dissolution, it is likely that one party will lose the direct benefit of this investment. It is quite clear that the value of the state retirement pension will diminish in the future and greater investment will therefore be made by individuals into private pension schemes. The value of pension funds and the benefits they will ultimately bring are therefore of great importance when considering the financial issues arising from divorce or dissolution of a civil partnership.

 

In the past, the value of any pension fund was simply one of many assets to be considered in a financial settlement. The courts were not able to make orders against any pensions and all they could therefore do was try to offset the loss of pension rights against any other matrimonial property. This has now changed and the court can make a pension sharing order against one party's pension funds. The effect of this is to give the other party their own pension. If, for argument's sake, a pension fund is worth, say, £100,000, and an order for pension sharing of 50% is made, each party will, once the order has been put into effect, have a pension fund worth £50,000. Obviously, this is a simplification of what can be a complex process and the advice of specialised financial advisers might be required to ensure that the appropriate proportions were correct. Some pension schemes do not allow pension sharing orders and the person receiving the benefit of a pension sharing order might be required to pay into a new scheme the pension rights they have acquired.

 

Pensions, therefore, must be considered very carefully on divorce. Proper advice is needed to ensure that they are dealt with appropriately.