Pensions and Divorce

Divorce can often be a process complicated by financial circumstances, however since 1 December 2000 pension sharing spitting has tried to reduce this complication.

Prior to this, there were two options, often resulting in inadequate provision for the equal distribution of pension benefits between ex-spouses:

Pension Offsetting

The preferred method of coming to an out of court settlement for all marital assets, including pensions. It provided a rough but hopefully fair means to split the assets equally. For example, one party might have the rights over property and investments while the other, business and pensions. Contributions into the pension could then continue independent of one another.

This did not always result in an even balance of assets, however, especially in cases of long-standing marriages and substantial pension funds

Pensions Attachment Order (Pensions Earmarking in Scotland)

A Pension attachment order redirects part or all of the members pension benefits to the ex-spouse or civil partner when it comes into payment. Previous pension earmarking orders made in England,Wales and Northern Ireland will still apply at the members retirement. This doesn’t provide a clean break, as an ongoing link with your ex-spouse or civil partner will remain.

Pension Sharing Order

Pension sharing was introduced from 1 December 2000 due to deficiencies in the above two systems and is now the most commonly used.

This involves the splitting of pension between the two parties with immediate effect and doesn’t involve waiting till retirement. The ex-spouse is given a pension credit against the member’s pension rights; a cash value that can continue with the original pension provider but treated separately, so you can decide what to do with your share independently.

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