Are pensions important on divorce?
Pensions are an extremely important asset when dealing with finances on divorce and they should not be ignored. Aside from property, pensions are often the largest asset in any divorce settlement and therefore, careful consideration must be given to them when parties are negotiating and reaching a financial agreement.
Pensions are treated slightly differently and there are various ways of dealing with them when separating from a partner. In order to achieve equality and a fair settlement it might mean that there needs to be an exercise of balance in relation to pensions.
One way of doing this is for there to be a Pension Sharing Order (PSO) – this is where an order is made for an agreed percentage of a pension fund to be transferred directly from one spouse to the other – each party will then have their own separate pension pot going forwards. Another way to achieve equality may be to offset the pension against an entirely different asset. For example, one party keeps their larger pension, but the other party retains a higher share in the family home or any other available capital asset. A less commonly used option available is earmarking whereby an agreed proportion of the pension is paid to the other person on the date of retirement instead.
Pensions can be relatively complex and sometimes it might be appropriate to obtain bespoke pension advice from an expert. An expert can provide a written report to show the most efficient and beneficial ways of dealing with pensions and this is particularly helpful if parties have multiple pensions with various pension schemes.
At the moment, we find ourselves in unusual times and pension valuations are changing everyday in light of the pandemic. There is no clear answer as to whether or not other valuations (such as, property and investments) will alter over the coming weeks and months. Nobody knows what the long term economic impact of the coronavirus crisis will be which emphasises just how uncertain this time currently is, especially for those trying to resolve financial issues on divorce.
In terms of financial settlements, it is tricky to ascertain whether or not settlements can be reached in the current situation we find ourselves in and this must be assessed on a case by case basis – it will be very much dependent on the assets and the individual needs the parties have.
Parties need to have up to date Cash Equivalent Transfer Values of pensions and there could be a delay in obtaining these during the pandemic and this must be taken into account when deciding whether to delay reaching an amicable and fair agreement. It is always a risk to reach a settlement without full and frank financial disclosure and without a proper understanding of the available assets – pensions are not an exception.
If you would like more information or advice about the issues raised in this article, or any aspect of family law please contact our expert legal team on 02080040065, by email at email@example.com or using the form below.
The contents of this article is general information only. The information in this article is not legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should obtain independent expert advice from qualified solicitors such as those within our firm.