Family Solicitors

For many people, their pensions can be one of their most important and valuable matrimonial assets. The treatment of those rights can be one of the most complex aspects of a divorce or dissolution settlement. When deciding such matters, Courts take many different factors into account and each party will need professional advice to determine which of the many available options is best for them.

Pensions of the Police, Armed Forces, NHS and some civil service pensions offer attractive pension scheme to employees and as such if you thinking of separating or wish to commence divorce proceedings are to seek specialist legal advice to ensure a fair and favourable outcome. This only applies to long standing private pensions.

A pension is a valuable asset but can be confusing to deal with upon divorce or dissolution of a civil partnership as provisions brought into effect from December 2000 allow a court to order one spouse to share his or her pension with the other.

There are three options available; (1) creating a Pension Sharing Order; (2) an Attachment Order or; (3) ‘Offsetting’ the pension.

The first step in deciding which path to take is for the pension to be valued. There are several ways to value pension rights but the simplest, cheapest and most common method is to use the Cash Equivalent Transfer Value (CEVT). This is the capitalised value of the pension and is the value of the member’s interest, which would be available, were the member’s pension to be transferred elsewhere. Those pension members who are not yet drawing their pension are entitled to one CETV per year free of charge and they are completed on a basis prescribed by the Government Actuary’s Department (GAD).

Once the valuation process is obtained, the pension holder can decide which route is most suitable for them.

The first option is a Pension Sharing Order, which creates two pensions from the existing one. The pension is shared at the time of the divorce and the spouse without a pension will receive a percentage share of the value of the member’s pension as it stands. The receiving spouse’s pension will remain in the pension scheme and can be claimed at the age of 60 or 65 depending on which section of the scheme the member is under. The receiving spouse’s pension is then totally independent from that of the giver.

An alternative to pension sharing is creating an Attachment Order. This enables the court to order the managers of the pension scheme to pay a proportion of the pension to the pension-holder’s spouse. In this instance, the pension-holder remains in control of their pension and cannot be compelled to retire at a certain age. Additionally, if the pension-holder dies, the pension benefit is lost. If the non-member remarries, then payments, which are akin to maintenance, will cease.

Offsetting, which is the third option, is where the non-pension holding spouse takes a greater share of the tangible non-pension assets to compensate for loss of a share of their spouse’s pension.

A pension is not immediately accessible, cannot be converted to ready cash and receiving an immediate offset is frequently more attractive than waiting until pensionable age as other factors could intervene to prevent a pension being paid, such as the scheme member dying. Therefore, a discount is usually applied to the non-pension asset to reflect its greater ‘utility’ in the immediate term. Therefore, those who are in this position should seek specialist advice from divorce solicitors.

By Savita Sharma