In Divorce or Dissolution the Pension can be the biggest asset after the family home. There are many different types of pensions, for example work place pensions, personal pension schemes and the additional State Pension. Pensions can be split several ways.
One option is Pension Sharing. Under this the Claimant gets a percentage share of any one (or more) of his/her ex-partners pension. This is either transferred into a pension in the Claimants name or, with some pension schemes it is possible to join the ex-partner’s pension scheme. If a person is having the benefit of a Pension Sharing Order but does not already have a pension then one would have to be set up.
Another option is Pensions Offsetting. This means that the value of any pensions is offset against other assets. For example, the Claimant may get a bigger share of the equity in the family home in return for the ex-partner keeping his/her pension.
Another alternative is a Deferred Lump Sum, i.e. the Claimant receives a lump sum from the ex-partner’s pension when he/she retires.
A further alternative is a Pensions Attachment Order. The Claimant receives some of the ex-partner’s pension when it starts being paid to them. The Claimant can receive some of the pension income, the lump sum or both but cannot receive the pension payments until the ex-partner starts taking his/her pension.
A first step in any Divorce or Dissolution proceedings is to obtain the value of the pension or pensions. This is the “Cash Equivalent Transfer Value”.
Once this is obtained the mathematical calculations can be undertaken and a decision made as to which option a Claimant wants to take.
As well as private pensions there are state pensions to consider. The Additional State Pension is part of a personal State Pension built up whilst employed. At present it is not possible to split the Additional State Pension in the event of a Divorce or Dissolution of civil partnership. It is possible to obtain a valuation of the additional state pension from the Pension Service by filling in a form B20.
There is also the Basic State Pension. It is not possible to split this in the event of divorce or dissolution.
However, a Claimant may be entitled to claim a basic State Pension using the ex-partner’s National Insurance record. It is possible to do this if their record during the Marriage or Civil Partnership was better than the Claimants. It does not affect their State Pension amount.
Both parties must reach state pension age before it can be claimed.
It is necessary to have a Court Order for Pension Sharing or Pension Attachment.
Whilst it is possible to agree to offset the pension entitlement against another asset without a Court Order, the advice is always to have any financial agreement embodied into an Order to make sure it is water tight and binding upon both parties.
It is a complex area of law and it is essential to obtain both legal advice and advice from a Financial Advisor.
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