Pensions in divorce settlements

Pension Sharing Orders are increasingly being used in divorce settlements as the values of each spouse’s pension funds are treated in much the same way as any other major asset of the parties to the divorce. Both spouses could benefit greatly from specialist guidance and advice from The Pensions Office. Our cost-effective fee-based service appeals to divorcing couples and their lawyers - especially when jointly instructed

The importance of pension benefits

The value of pension benefits almost invariably represents either the largest or second largest asset in divorce settlements, along with the matrimonial home. Typical values of (employer-sponsored) final salary pension benefits are between £50,000 and £100,000. Personal Pension fund values are usually at least £20,000. 

Even state pension benefits should be taken into consideration, with values up to £100,000 or more ‘at stake’.

Rarely can these values be ignored during negotiations between the two spouses. However, there is no single method by which pension benefits may be taken into account. In fact, there are three:

• Offsetting (also known as ‘set off’) This means that the spouse with the more valuable pension rights gives up more of his or her non-pension assets to help achieve overall fairness. Specialist valuation of the pension benefits is essential.. from The Pensions Office. 
• Attachment orders (previously known as earmarking orders) These can be likened to regular maintenance payments which are deferred until one of the spouses reaches retirement age. There may be unwanted implications to these orders on the death or remarriage of one of the spouses. These are little used nowadays.  
• Pension Sharing Orders (previously known as ‘pension splitting’) This type of order transfers part of the value of one spouse’s pension benefits to the other spouse. The transfer may take place within the same pension scheme or to a separate arrangement: seek specialist advice... from The Pensions Office

The best method

There isn’t a single best method for all divorces (or, for that matter for all divorcees): one of the options might be best for one of the spouses but much worse for the other. Both parties to the divorce - or more likely, their legal advisers - should take specialist advice.