divorce and pensions

There are several types of pension. They are:

1. State pensions

o The basic state pension open to everyone
o State earnings-related pension scheme (SERPS)
o State second pension (replacement to SERPS)
o Stakeholder pensions

2. Pensions provided by your employer

3. Private pension arrangements. These are called personal pension plans and these are normally taken out by the self-employed but there are circumstances where employed persons can take out one as well.

4. Foreign pensions.

Pensions have to be seen as just one part of an overall financial settlement on divorce. For example if one party keeps his or her valuable pension then that person may give up another valuable asset to the other spouse such as a share in the former matrimonial home or an investment.

The sort of order the court can make on divorce includes:

Pension sharing

Where a share of a pension fund is transferred to the other party. As a result the spouse receiving the share is entirely independent and can make nominations (e.g. who should receive the income in the event of death if that is one of the benefits available) or choose when to retire without reference to the other spouse.

Offsetting

Where one spouse receives more cash because the other has a better and more valuable pension.

Ongoing maintenance

Not exactly an order specific to pensions but relevant where a spouse does not have a pension and if reasonable should receive an income from the other. A maintenance order would be particularly relevant if the pension fund is not big enough or there is no capital to off set the pension.

Attachment

Before you can agree with your spouse what is going to happen with the pensions you first have to know, and agree on, the value of the pension.

The law refers to pension valuations being based on the “cash equivalent transfer value” (CETV) and figures can be provided for this by the pension provider. This value, although appropriate in some situations, may seriously undervalue the pension and associated benefits.

To make an informed decision on pension values we recommend that you have your and your spouse’s pension rights expertly valued.