Pensions are frequently the most significant financial asset in a marriage, often worth more than the family home, yet they are also the most commonly overlooked in divorce settlements. Understanding how pensions are treated in financial remedy proceedings is essential.
Pensions must be disclosed
All pension arrangements must be disclosed on Form E. Each pension must be given a cash equivalent transfer value (CETV), a snapshot of what the pension is worth at that point in time. For defined benefit (final salary) schemes, the CETV can be misleading and expert advice is often needed.
How pensions can be divided
There are three main ways pensions can be dealt with in a divorce settlement:
- Pension sharing order, a percentage of the pension is transferred into a separate pension in the other party's name. The cleanest and most common approach.
- Pension attachment order, payments from the pension are redirected to the other party when the pension comes into payment. Less common and less clean.
- Offsetting, the pension holder keeps their pension but the other party receives a greater share of other assets (e.g. equity in the property) to compensate.
Getting pension advice
For significant pension assets, specialist pension on divorce advice from a PODE (Pension on Divorce Expert) is worth obtaining. The cost is usually a few hundred pounds and can make a significant difference to the outcome.