Pensions are some of the most valuable assets in a divorce. They’re often worth more than the family home.

In many cases, one spouse’s pension is worth a lot more than the others. Without careful consideration of pensions during a divorce, one spouse could face a huge loss in retirement income.

If you’re facing a divorce, you might be thinking ‘How do I protect my pension?’ Or ‘Am I entitled to my husband/wife’s pension if we divorce?’

This article explains all.


Key Takeaways

  • Pensions can be shared on divorce based on what is ‘fair and equitable’.
  • There are a range of ways to share a pension on divorce, including offsetting, earmarking, and sharing.
  • Defined benefit and state pensions can be more complex
  • How much of your ex-spouse’s pension you are entitled to is dependent on things like; how many dependent children there are and who looks after them, the financial situation of both parties, your age and health, the length of your marriage and your contribution to it.
  • There is no time limit to claiming against your former spouse’s pension. The only way to prevent this is through financial settlement


How Are Pensions Shared in a Divorce?

When you get divorced or end a civil partnership, both yours and your spouse’s pensions are classed as financial assets.

It is important to remember that a divorce itself doesn’t determine who gets what. A divorce is the legal ending of your marriage. The dividing of assets is separate, and you will need a financial settlement agreement which is ‘fair and equitable’.

There are the ways of dividing and sharing pensions on divorce:

  1. Pension offsetting
  2. Pension earmarking or attachment, and
  3. Pension sharing

Pension Offsetting

This works by trading off one spouse’s pension against other assets from the marriage or civil partnership.

For example, you might keep your pension and your ex-spouse might take the family home.

This can work well if a pension and other assets are of similar value. However, pension offsetting might not work if the pension is the biggest asset and there are no other assets to trade against it.

Pension Earmarking / Attachment

Also known as ‘pension attachment’, this divides the pension when it becomes accessible, usually from the age of 55.

Each spouse will get a percentage of the pension benefit agreed in the financial settlement.

The downside to pension earmarking is if your ex-spouse controls the pension pot. They keep control of which investments they choose as well as when the pot pays out.

This could;

  1. Reduce the value of the pension for the other person, and
  2. Could also delay when the pension starts to pay out.

Pension Sharing

Pension sharing is the most popular option amongst divorcing couples.

This splits the pension into two pots from the date of divorce, allowing each spouse to control their own pension. This means you can both decide which investments to make and access the benefits when you want (from age 55).


Defined Benefit Pensions Can be More Challenging

A Defined Benefit or Final Salary pension does not involve an invested pot of money. It is usually an employment pension that pays a defined income, lump sum, or a combination of both based on employment earnings, length of service, and age.

Because there is no specific asset value, dividing this type of pension can be challenging.

There are two ways to do it;

Transfer the Pension

The first is to transfer the Defined Benefit pension into a regular pension. You can then divide it according to the terms of your financial settlement.

That said, some Defined Benefit pension schemes do not allow transfers out. Even if they do, the transfer value might be lower than the original pension.

Share the Pension

The second way is to share the pension when it is available. However, this is usually only available if the Defined Benefit Pension does not allow transfers out.


What About State Pensions?

Reaching State Pension Age After 6th April 2016

On 6th April 2016, the government introduced the ‘new’ state pension. If you reach pension age after this date, a state pension cannot be shared if you get divorced.

However, if you have a ‘protected payment’, the court might decide to share this between you. This is an extra payment you might be entitled to because your entitlement under the old rules was higher.

Reaching State Pension Age Before 6th April 2016

If you reached state pension age before 6th April 2016, the old rules apply.

The old state pension is divided into 2 parts;

  1. The basic state pension, and
  2. The additional state pension.

Both have slight differences.

You might have accrued entitlement under both or just the basic state pension.

Your basic state pension cannot be shared if you get divorced. However, you can use your ex-spouse’s National Insurance contributions to increase your basic state pension. This will not reduce their entitlement.

If you qualify for the additional state pension, the court could decide that is to be shared. That said, you will lose the rights to this if you re-marry before state pension age.


You Must Get an Accurate Valuation of ALL Pensions

Regardless of who’s pension is worth the most, you must get an accurate valuation of all pensions held. This is often more complicated that just looking at your last pension statement.

One or both of you might have multiple pensions from different jobs you have held in the past. Some of these jobs might have had added benefits and their value for a financial settlement might be a lot more than a transfer value. As such, it is vital to find and get a valuation of every single pension you have.

Both parties must provide full disclosure of all assets for a financial settlement. If you have forgotten about any pensions, you could be accused of concealing assets. This could result in an expensive legal battle and financial settlement.


How Much of My Spouse’s Pension Am I Entitled to?

It is important to remember that a financial settlement should be ‘fair and equitable’. It is not to punish the other party by taking as much as you can and leave them with as little as possible.

As a starting point, pension assets (along with other assets) will be divided 50/50.

However, this is likely to change based on the situation and needs of each person.

Factors that Can Affect How Much You’re Entitled to

When how to divide all financial assets (not only pensions), the court will consider;

  • Children – How many dependent children do you have and who will they live with?
  • Current financial situation – What sources of income does each spouse have? Is it enough to maintain an acceptable standard of living?
  • Age and health – If you are older or in poor health, you might be entitled to a larger share. The younger and healthier you are, the more likely you might be able to improve your financial situation. This means if you are the younger spouse, you might receive less.
  • The length of the marriage – If your marriage lasted less than 12 years, some pension assets accrued before the marriage might not be included in the financial settlement.
  • Contributions to the marriage – the court views bringing up the family and ‘being the breadwinner’ as equal contributions. This means being the highest earner does not earn the right to a higher portion of the financial assets.


How Can I Protect My Pension When I Get Divorced?

Depending on your position in the marriage, the words ‘protecting my pension’ will mean different things.

For example, if you have been the biggest earner, chances are, you will have the highest value pension.

On the other hand, if you are the lower earner, or you have raised the family, you’ll likely have a much smaller pension pot, if you have one at all. In this case, you’ll want to claim enough pension value to help support you in later life.


How Long After My Divorce Can I Claim a Share of My Ex-Spouse’s Pension?

There is no time for making a claim against your ex-spouse’s finances. This makes financial settlements incredibly important.

A legally binding financial settlement will separate your finances from your ex’s finances for good. This means neither one of you can claim against the other in the future.


What if We’re Not Married or in a Civil Partnership?

If you are not married or in a civil partnership, then neither spouse is automatically entitled to the other’s pension.


How Ringrose Law Can Help

When dealing with pension on divorce, different types of pensions need different approaches. We have helped clients with significant pension funds including;

  • Private pensions
  • Self-invested personal pensions (SIPP)
  • Public sector pensions (NHS, Armed Forces and Civil Service)
  • Small Self-Administered Schemes (SASS)
  • Final salary and defined benefit pensions
  • International divorce against UK pensions

For more information or to see how we can you claim against your ex-spouse’s pension, or protect your own, contact us today.

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