How to protect your pension in divorce
Divorce can cause plenty of uncertainty with regards to future. Arrangements for children, finances and property need to be made , but often people’s biggest concern is their pension.
To many people, their pension is considered to be their most valuable asset alongside property, and in the event of a divorce, it is not particularly something that anyone would want to part with, even if it’s just a portion. This is particularly as it’s something that takes years of hard work to obtain and is vitally important for the future after retirement.
Here we will outline whether pensions have to be included in a divorce settlement, how they are split, whether agreements made prior to marriage can be upheld and how a divorce solicitor can assist in the protection of your pension.
Do you have to split your pension in a divorce?
Pensions aren’t always split in the event of a divorce. The court will take into account two types of assets when it comes to a financial settlement between ex-spouses. These assets are matrimonial assets and non-matrimonial assets. Matrimonial assets are assets that are accumulated during the marriage, e.g. family home, car, etc. In contrast, non-matrimonial assets are assets that were acquired before the marriage, for example, investments, savings, pensions, etc.
Before it is decided whether both matrimonial and non-matrimonial assets will be considered in the financial settlement, the court will look at some factors in concern to the divorcing couple and any children.
The factors which are considered when reaching a financial settlement include:
- The needs of any children
- Each party’s current and expected income, earning capacity and other financial resources
- Each party’s current and future financial needs, obligations, and responsibilities
- Each party’s standard of living enjoyed before the breakdown of the marriage
- Each party’s age
- The duration of the marriage
- Any mental or physical disability either party have
- Contributions each party has made or is likely to make in the foreseeable future
- Each party’s conduct during the marriage
Where these factors are applicable to divorce, both matrimonial and non-matrimonial assets could be considered, including pensions.
How is a pension split in a divorce?
Whether a pension is split during divorce will depend on if the factors above are applicable to the divorcing party’s circumstances. There are three ways a pension is usually split during a divorce: pension offsetting, pension sharing and pension attachment.
Pension offsetting
In simple terms, pension offsetting means the value of any pension is offset against another asset, for example, property. One person may get a larger share of the jointly owned property for the other party to keep their pension. This provides the divorcing couple with a clean break and is often used as an option when a pension split is necessary for a divorce.
Pension sharing
Pension sharing is an option that is used more frequently due to the clean break it provides divorcing couples. The way it works is that one party will transfer a share of their pension into their ex-spouse’s name, or the ex-spouse can join the pension scheme.
Pension attachment
The arrangement for this type of pension split is that one party will agree to pay their ex-spouse a monthly portion or lump sum of their pension. The payments cannot be paid to their ex-spouse until they can start to receive their pension.
Due to this type of split not allowing for a clear break because of the monthly payments, it is not often used as an option.
Can a pre-nuptial agreement protect my pension?
A pre-nuptial agreement isn’t a legally binding document, which means if the court considers it to be unfair and/or it impacts any dependants, the court can make an alternative order and disregard the agreement.
Where pre-nuptial agreements are made accurately and do not impact either party adversely, the courts tend to allow them in most instances.
How can a divorce solicitor help?
No matter your situation in regard to the divorce, we would always recommend seeking the assistance and guidance of an expert divorce solicitor. They will be able to provide close personal support throughout the proceedings, which will help avoid mistakes and provide you with reassurance that everything has been handled properly. Furthermore, a divorce solicitor will be able to deliver specialist advice on how to negotiate a financial settlement that best suits your circumstances.
Get in touch with our family law solicitors today
To speak to one of our family law solicitors today, then please ring 0208 680 5018 or contact your local Atkins Hope office in Croydon, Blackheath or Guildford.
