Pensions & Divorce – What you need to know

Yes, the court will want to know about all the pensions irrespective of when they accrued. Depending on the type of scheme and the values there will often be the need to obtain a report from a pension expert (usually an actuary) as to the fair market value and what pension share orders should be made to achieve the desired result. It is increasingly accepted that pensions should be shared to give equality of income in retirement.

That depends on numerous factors such as the value of the pensions, the value of other assets, the length of the marriage and the ages of the parties. Case law has determined that the sharing principle should apply to pensions in the same way as it does to other matrimonial assets, but this does not necessarily mean that pensions are split equally. There may be other ways of reaching a fair division of assets and this is an area where specialised advice is needed from the onset.

Generally, the court in England & Wales cannot order a share of a foreign pension scheme. However, there can be some ways round this, and it may be possible for an application to be made in the other country. Alternately one would have to try and offset or order periodical payments to be made once the pension was in payment. If there is a large foreign pension scheme thought should be given at a very early stage as to where the proceedings should be commenced.

English pension administrators will not accept a foreign order so an English pension sharing order is needed. It may be possible to apply for financial relief in England after a foreign divorce by making an application to the English court under Part III of the Matrimonial and Family Proceedings Act 1984 if inadequate provision has been made by in the foreign divorce and if the applicant has a close connection with England & Wales.

A pension can be dealt with by 3 main methods:

Pension sharing

An order is made directing a percentage of one party’s pension fund to be paid into a scheme for the other party. This becomes a pension fund totally under the control of the new owner. The pension is split immediately following the finalisation of the court order and the divorce.

Offsetting

This avoids a pension share by giving the party with less pension value a larger share of a non- pension asset instead of sharing the pensions

Earmarking

This was the method by which pensions were shared before the court had power to order pension sharing. It earmarks a percentage of the pension scheme member’s benefits and payment is then paid to the other spouse once the member retires. It is not ideal but in some limited circumstances it still does have an application.

You will need to give full and frank disclosure of your pensions. You may be able to suggest that any pre-acquired pension or portion of a pension is not brought into account but the success of that will depend on the circumstances and whether the other party’s needs are otherwise met. You can also consider offering something from another class of asset instead (offsetting).

Our expert London divorce lawyers are experienced in all aspects of financial division of assets for married couples and civil partners, including pension division, business asset division, Trusts, property and more.

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