Do I Have to Share My Pension With My Ex When We Divorce?

Married couples can seek a share in their spouse’ pension on a divorce. In comparison, cohabiting couples will not benefit from their partner’s pension, unless they are named formally as a ‘nominated beneficiary’ and this is not changed post separation.

As family lawyers in Milton Keynes, we are here to provide you with expert guidance tailored to your individual circumstances. In the meantime, this article offers a quick overview of how pensions are often dealt with in a divorce.

The first step is information gathering. This can be done voluntarily but if court proceedings are issued then it will become mandatory. Both of you have a duty to provide full and frank disclosure about your financial circumstances, which includes the value of your pensions.

This is usually documented in a ‘Form E’ which has a specific section dealing with pensions. You will both need to obtain the cash equivalent value (CEV) and details of your pension benefits for all pensions you have accrued (including those acquired pre marriage or post separation). The CEV is a capitalised value of the pension benefits. The value is notional, based on what the value of the pension would be if transferred to a new scheme. It is calculated on the basis that the member leaves the pension scheme on the date of the calculation; no account is therefore taken of future membership.

Scheme administrators have an obligation to provide these details, but it can take some pension providers a while to provide the information, particularly if the pension is a public sector one. Pension administrators do not normally charge for providing the CEV statement unless it is required urgently, or you have already been provided with a valuation in the last twelve months. If financial remedy proceedings have been issued, the CEV must be no more than 12 months old prior to the first directions appointment.

A family lawyer will be able to guide you through the information that is received in respect of pensions and your wider financial circumstances. However, it may also be necessary to instruct an expert to assist you in understanding the pensions and what a fair pension share on divorce may look like.

Pension are complicated as there are different types of pension schemes and different terms and pension rules. Added complicating factors may also include differing retirement ages and benefits that can be lost on pension sharing.

The Pensions Advisory Group have released a Guide to the Treatment of Pensions on Divorce (The PAG report) which provides guidance as to where a Pensions on Divorce Expert (PODE) should be instructed, for example (but not limited to), where pensions are public sector defined benefit schemes, where there is a substantial age gap between the parties and where the combined defined benefit pension values are over £100,000. A family lawyer will be able to advise you on whether a PODE is needed and proportionate in your case and what their report should address.

There are various options available to the court to deal with pensions. The most common methods used are Pension Sharing Orders (PSO) and offsetting. A PSO is the most popular way to deal with pensions as they allow a clean break. Once the order is implemented, you and your ex will have your own independent pension benefits that you can deal with as you wish. The pension benefits under the member’s pension scheme are divided between the parties, so you each have your own separate and independent pension rights. The non-member party may have the option to keep the benefits within the same pension scheme or transfer them to a different one (the pension scheme rules will tell you what options are available). The percentage used to divide the pension is completely dependent on the circumstances of the case and could be anything between 1% to 100%. Pension schemes are not bound by the CEV at the date of the order. The CEV is recalculated at the time of implementation. There is usually a fee from the pension provider to implement the pension share.

Offsetting on the other hand, is a method of trading the right to receive a pension provision (or part of it) for capital. For example, if one of you has a larger pension, the other party may receive a larger share of the proceeds of sale of the family home instead of a pension share. The difficulty with offsetting is that the CEVs are only an estimated snapshot at a particular time and the actual value could be much higher or lower than the CEV provided meaning the offset is unfair, particular where defined benefit pensions are involved as their true value is often much higher than the CEV. A pension expert can be instructed to advise on the appropriate amount to be offset.

There is also the option of pension attachment orders but they are not very popular since the introduction of PSOs as they redirect some or all of one party’s pension benefit to the other when the benefits fall due. It is not a clean break which makes it unattractive.

If both you and your ex have pensions, it is likely that they will all need to be considered. It is unlikely that you will have to give up exactly half of your pension if your ex-spouse already has a pension provision as their pension provision will also be taken into account.

It is also important to highlight that the court may consider ‘apportionment’ appropriate. This is the process of adjusting the pension value to account for benefits that may have been accrued before or after marriage, although often the court consider the whole pension pot regardless of when it was accrued due to the income needs of the parties in retirement, especially in cases where there was a long marriage.

How pensions are dealt with in any particular case will depend on the facts and other assets in the case. The courts can use one or a combination of the above methods.

It is important to take legal advice on the treatment of pensions in your particular case to ensure that you reach a fair settlement with your ex. It may be necessary to involve a pensions on divorce expert for further guidance.

Ready to take the next step? As leading divorce and family law solicitors in Milton Keynes, our team of specialists can advise and guide you from the moment we start working with you.

As well as our head office in Milton Keynes, we also have offices in Bicester, Watford, and London where we can arrange appointments to see you in person. Talk to us in confidence and find out where you stand. Get in touch – we’re here to help.

This article is intended for the use of our clients and other interested parties. The information contained in it reflects the author’s view and is believed to be correct at the date of publication. However, it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional legal advice.