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Divorce - Don't forget the pensions

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18 July 2014

Divorce - Don't forget the pensions

As a family solicitor, people come to see me about a variety of matters concerning divorce and separation.  Where they are seeking advice about marital breakdown I commonly ask what they are most worried about at present.  Very often they will tell me that their primary worries are the arrangements for children, the matrimonial home or income.

The above are all perfectly understandable concerns to have and it is sensible that you take advice with a view to properly addressing the issues.  One issue, however that very rarely comes near the top of a clients’ concerns is pensions.

I find that it is often the case that very little thought is given to pensions and how they should be dealt with on divorce.  On occasions clients have provided me with a summary of their financial situation during the marriage with no mention of any pensions, only to then confirm when asked 'oh yes my husband has been paying into the local government pension scheme for the last 20 years'.

I have also seen a number of cases where clients have come to see me about implementing an agreement in relation to the finances that they discussed with their spouse, where the agreement has no regard to the available pension provision.  In my experience there are a variety of reasons for this:

  • A lack of interest in pensions - ' oh I am not bothered about his/her pension, they can keep that.'
  • A perception that they have no entitlement to a pension if it is in the other person’s name.
  • A lack of or misunderstanding as to the value of a pension.

Don’t get me wrong, pensions can be complex.  I have been informed before by clients that the value of their spouse’s pension is £20,000, only for subsequent disclosure to reveal that this is the estimated annual income of a pension with a value in excess of £200,000.

The point I regularly ask clients to consider, particularly when most or all of the pension provision is in their spouses name is 'when you retire what are you going to live on?'  Even if retirement is 10, 20 or even 30 years away is it appropriate that your spouse receives the sole benefit of a pension that was built up, at least in part, during your marriage and you are left to manage on the state pension?

There are some key points to bear in mind when considering pensions:

  • Don't think of the pensions as being less important than other assets (even if you do decide that you do not wish to seek a share of your spouse’s pension you may well be able to offset your entitlement to the pension against other assets).
  • Do not simply accept that you do not have an entitlement to a share of your spouses pension. Your entitlement will depend on a number of factors.  Take legal advice.
  • Always insist that your spouse provides full up to date details of their pension provision, together with their other financial information.  The information should include a cash equivalent transfer value (CETV).  You will require this information to make informed decisions and you solicitor will require it to advise you.
  • The court has the power to make a pension sharing order providing one party to the marriage with a percentage share of the other persons pension.  Whilst the aim is to reach an agreement with regard to the division of pensions and other assets a decision can be made by a court if required.

In summary it would be understandable if during the course of a marital breakdown, pensions were not at the forefront of your thoughts however to disregard them is a decision you may well come to regret.   If you reach agreement over the financial issues and enter into a court order then you will be bound by that order and cannot (save for very exceptional circumstances) revisit it.  Pensions accrued over a number of years can have values of tens or hundreds of thousands.

You should take advice from a qualified family solicitor about all of the financial issues that may arise out of a divorce and they can advise you as to how best to proceed. 

Oh and don't forget to mention the pensions!

 

Gareth Long