The government’s white paper released on January 14, 2013, introduced significant updates to pension regulations in the context of divorce. For the most current information, it’s advised to consult resources on Pensions and Divorce.
Understanding Pensions in Divorce
Pensions are often overlooked in divorce discussions, yet they can be among the most substantial assets, especially for individuals nearing retirement or those with significant pension savings. Regardless of age, gender, or current understanding of pensions, it’s crucial for everyone going through a divorce to consider pension assets carefully.
Pensions Basics
A pension is essentially a long-term savings plan aimed at supporting you in retirement. The value of pensions, particularly money purchase pensions, can fluctuate based on investment performance. During divorce proceedings, pensions are evaluated based on their current transfer value, known as the Cash Equivalent Transfer Value (CETV).
The Importance of Discussing Pensions
Pensions can represent a significant portion of the marital asset pool. They offer financial security for retirement and can be a key element in negotiations. Both parties in a divorce should understand the value of pensions involved and how they can be equitably divided.
Pension Rights in Divorce
Pensions are not just personal assets but are considered part of the marital assets that need to be divided upon divorce. This division can be handled through various means, including offsetting, earmarking, and sharing, depending on the circumstances and timing of the divorce.
Options for Pension Division
- Offsetting: Trading the value of a pension against other marital assets.
- Earmarking: Allocating a portion of pension payments to the other spouse upon retirement.
- Sharing: Dividing the pension assets at the time of divorce, allowing for a clean break.
The Process
- Gathering Information: Collect all documentation related to your pension plans. If you’re not on amicable terms with your spouse, your solicitor can help obtain this information.
- Understanding the Types of Pensions: There are primarily two types of pension schemes – money purchase and salary-related, each with its own method for calculating the CETV.
- Evaluating Pension Assets: Determine the value of pension rights through the CETV for money purchase schemes and a more complex calculation for salary-related schemes.
- Considering Legal Options: The courts have broad powers to distribute pension assets, with options ranging from a clean break through pension sharing to earmarking for future payments.
Additional Resources
- The Pension Service: Part of the UK’s Department for Work and Pensions, offering guides and an online Pension Calculator.
- The Pensions Advisory Service (OPAS): Provides independent advice on pension issues and disputes.
- Pension Credit: A benefit for people aged 60 or over that guarantees a minimum income.
Moving Forward
Addressing pension rights in divorce is essential for ensuring financial security in retirement. Both parties should seek legal advice to understand their options and make informed decisions. Further information can be obtained from legal aid articles on financial settlements and by consulting a family law solicitor.