Pension Sharing on Divorce
If you are divorcing, you or your spouse’s pension provision may well be of significant relevance when considering the division of matrimonial assets.
The law allows pensions to be shared between parties on divorce to assist in achieving a fair settlement. Given the different types of pensions this is a notoriously complex area and it is usually advisable to obtain advice from a financial advisor specialising in pension sharing.
What is Pension Sharing?
Pension sharing is the process by which a portion of a member’s pension fund (known as a ‘pension credit’) is shared with the recipient spouse. This is achieved either by depositing it in a new pension scheme or by means of an internal pension transfer whereby the pension credit remains in the original scheme but in the recipient’s sole name. It is necessary to obtain a pension sharing order through the Court to implement a pension share. This can be done by way of a consent order submitted to the Court for approval where there is an agreed financial settlement between the parties.
How is the Pension Valued?
The ‘Cash Equivalent Value’ or CEV is used to value a pension on divorce. This is the value given by a pension scheme for the benefits of the member transferring out of the scheme if you decided to move it to a different scheme. It is important to request a CEV at an early stage of the negotiations as some pension schemes can take several months to produce them.
Costs of Pension Sharing
Usually, pension providers charge fees to implement a Pension Sharing Order. These fees can be substantial, and it is therefore important to consider who will be responsible for the fee, whether it should be shared, or alternatively paid out of the pension fund. The issue of the fee should be addressed early in the process to avoid difficulties later on.
The Pension Advisory Service provides information on pension sharing https://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/when-relationships-end/pension-sharing
If you would like to discuss any of the matters raised here please contact our experienced family law solicitors Louise Higham 07702 316402 or Nicola Harvey 07557 017127.
Louise Higham
Family Consultant Solicitor
Louise is a highly experienced family lawyer advising clients on all aspects relating to matrimonial and relationship breakdown, including divorce, separation, financial settlements, pre and post nuptial agreements, cohabitation agreements and child arrangements.