Dealing with pensions in divorce

Dealing with the impact of divorce on pensions is rarely straightforward. Concerns may include whether pensions will be divided up and how this would affect income and retirement.

Pensions  should be factored into any financial settlement on divorce, whether you are close to retirement age or not. They can be complicated to deal with because each pension is different, with its own set of scheme rules and varying contributions. It is important to seek legal advice on how each pension may be treated on divorce so that you can consider how this affects the settlement that you reach and your long-term financial security. 

Our lawyers

Pensions are often the most valuable – but most overlooked – asset during divorces. So it is well worth investing in the best expertise to ensure pensions are dealt with in an optimal way .

Our lawyers have unrivalled experience in dealing with pensions. We work with our clients to understand their objectives for their pensions, for example, providing income on retirement or providing a capital lump sum. Partner, Philip Way, is Chair of the legal committee behind the gold standard guidelines for professionals dealing with pensions on divorce.

We regularly advise on the role of pensions and on how pensions can be considered within a wider financial settlement. We have:

  • Dealt with a range of pensions including public sector pensions, SIPPs (Self Invested Personal Pension), defined benefit schemes and defined contribution schemes
  • Advised clients in relation to pensions abroad and how they can be considered within a settlement
  • Worked with pensions on divorce experts (PODE) to understand the pension arrangements fully before advising our clients on how the pensions should be considered within a settlement
  • Advised clients on the implementation of pension sharing orders
  • Advised clients on enforcement proceedings where an order has not been implemented

We are well known for our expertise in advising on pensions with an international dimension.

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What you need to know

The starting point on divorce is the sharing of matrimonial assets, and this includes pensions. Pensions can be overlooked by parties on divorce (particularly where parties are not close to retirement age), but they can be one of the largest assets in the case. You may be tempted to focus on tangible assets in your case like a house or car, but it is also important to consider your future financial planning after separation, including what you will do on retirement.

It is important to get disclosure about any pensions to which either you or your partner are entitled, including state pension and the additional state pension. The first step would be to obtain a cash equivalent transfer value (CETV) for each pension, which will tell you what that pension is worth in pounds if you were to sell it on the open market. However, CETVs are not always an accurate summary of what a pension might be worth. Some pensions, such as defined benefit pensions and publicly funded pensions like the NHS, can be more valuable than their CETVs suggest. It is also important to consider the terms of each pension scheme because this will tell you when you can draw on the pension, whether a capital lump sum can be drawn out, how and where the funds are invested and how much income you may be able to draw from the pension.

Pensions are complicated and, to fully understand them, it may be necessary to instruct a pensions on divorce expert (PODE) to produce a report. This report will summarise how the pensions within your case could be shared to achieve objectives that you or your partner may have, for example, equalisation of income on retirement. Our lawyers are experienced in working alongside PODEs to obtain reports for our clients, explain what they mean and use the information to reach a settlement.

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Frequently Asked Questions

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Pensions and divorce - what do I need to know and think about?

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This vlog looks at the things you need to think about if you are getting divorced and have a pension- what information do you need? How is a pension valued? What can you do to share the pension benefits? Caitlin Jenkins, the familylawvlogger, discusses all things pension with her Mills& Reeve partner and pension expert, Philip Way.

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