Divorce isn’t something people account for when they get married and often has a dramatic effect on retirement plans and your pension. A pension is a valuable asset when it comes to divorce and you have a range of options when it comes to a financial settlement. The main aim of a financial settlement is to share out assets in a way that is considered fair and equitable, so if one individual has a larger pension pot than the other it’s important to divide this fairly.
Here’s what will happen to your pension in the event of a divorce.
How are pensions shared out in a divorce?
Pensions can often be overlooked because of bigger assets such as the family home but they can be one of the largest assets in a divorce.
There are three methods for pension sharing:
This is the most common way of sharing the pension and means one person takes the entire pension and the other person receives assets equal to the value of the pension such as cash or property. This may not work in cases where the pension is the largest single asset and there are no sufficient assets to trade off against it.
In this case, the court makes an order stating that some, or all, of the spouse’s pension, must be paid to the ex-spouse when they start receiving their pension. The ex-partner can receive either all or part of the member’s pension income, the member’s tax-free cash sum or a lump sum when the member dies.
Pension sharing order
A pension sharing order is favourable because it allows for a clean break from the other person as the pension is split into two separate pots from the date of divorce. This allows each person to have complete control of the money and receive it whenever they want, anytime after the age of 55.
A pension sharing order can only be completed with a court order because a pension cannot be transferred from one spouse to the other without instruction from the court.
The court will award a percentage of one spouse’s pension value to the other person after the marital assets have been assessed. The amount awarded to one spouse is referred to as a pension credit and the amount taken from the other person is called a pension debt.
Richards & Lewis are qualified local solicitors in Ebbw Vale specialising in divorce law. We understand the importance of finding solicitors you can trust during a difficult time which is why we are committed to supporting you through every step of the process. Dividing financial assets can be particularly tricky so we work with you to settle any issues in a fair and supportive course of action. Contact us today to find out more.