Divorce Pension Issues Explained

Divorce is one of the most stressful things we can experience in life. In many cases, pension entitlement is a key part of the divorce settlement. When a couple gets divorced, they usually ask the courts to decide on the apportionment of their assets; their property, cars and money amongst other things. New laws regarding pensions mean that the pensions of both parties must be considered at this point. Pension legislation is already complex, and divorce lawyers must make sure that a fair split of the pension is reached, depending on the circumstances of the divorce.

New laws regarding pensions mean that the pensions of both parties must be considered at this point. The government has introduced three particular measures in an attempt to provide greater flexibility and choice for both the divorcing couple and the courts:

Sharing - The pension and the pension rights are shared between the couple. This is suitable for members of occupational, personal or stakeholder pension schemes. Pension sharing is not compulsory and does not apply in the same way to the basic State Pension. Once a pension sharing order is made, it cannot be altered.
Offsetting - Any pension benefits held by the couple are offset against any other assets.
Earmarking - A specified amount of the member's pension and/or lump sum is payable to the ex-spouse.

In most cases, the court will only be able to issue a ruling based on percentages of the final pension amount, as it is impossible to put a figure on a pension that may not be collected for another 20 years or more. In many cases, the court may start with a 50/50 split of the pension and the parties can negotiate from that basis, depending on individual circumstance. Often, the legal teams will ask a pensions expert to conduct an assessment of the potential value of the pension in order to provide a guide to the court.

What Is A Pension Credit And A Pension Debit?

Pension Credit is the pension benefits you receive from your ex-spouse as a result of the divorce proceedings and Pension Debit is the pension benefit that you have to give up to your ex-spouse. In many cases, it is the wife that is in receipt of pension credit and the husband who encounters pension debit.

It can often take some time for the pensions issues to be sorted out to the satisfaction of both parties and, in some cases, can delay the rest of the divorce proceedings. It is a complex area, and if you are preparing for, or going through divorce, you may want to speak to an independent pensions adviser, who can help you understand the various options available to you and give you some guidance on which of those options might be best for you.