When determining a fair financial settlement upon divorce, it is absolutely paramount to consider both parties’ pension entitlement as pensions are often a significant asset of either party or of both of the parties.
The first detailed study into pension sharing upon divorce was published by Cardiff Law School earlier this year and provided some very interesting statistics indeed.
37% of divorces in England & Wales result in the parties seeking a financial order from the Court and only 8% of financial orders upon divorce result in any formal type of pension provision at all.
So what are the options for dealing with pensions upon divorce?
There are different types of orders which the court can make when determining pensions upon divorce namely, Pension Earmarking/Attachment, Pension Sharing or Pension Offsetting. Pension offsetting is whereby the party seeking a share of their Spouse’s pension receives a larger proportion of other matrimonial assets to compensate them for their Spouse retaining all of their pension entitlement.
An attachment order takes effect upon the pension holder’s retirement and usually provides a lump sum on retirement as well as monthly payments. Payments would be determinate upon the pension holder actually drawing down his/her pension entitlement. One of the main disadvantages of a pension attachment order is that if the pension holder was to die before his/her spouse or die prior to retirement then the Spouse would lose the pension benefit. Earmarking/pension attachment orders are not very common and not particularly popular.
A pension sharing order is a very useful type of order and enables the Spouse to receive a long term financial benefit. Basically a percentage of a spouse’s pension can be severed from their pension pot and transferred into a separate pension scheme in their ex-spouse’s name.
You can always offset when it comes to pensions, for example receiving a greater share of the matrimonial assets in exchange for a spouse keeping all their pension entitlement. This is by far the most popular way of dealing with pensions however it is only possible where there are actually other assets to offset. It is extremely common that a pension holder wants to retain their full pension entitlement and they therefore negotiate with their spouse by giving them a larger percentage of the other matrimonial assets.
The statistics show that offsetting pension entitlement is the most popular means of dealing with pension entitlement upon divorce however it is common for spouses to under settle their overall entitlement for a greater initial lump sum. It is therefore extremely important that consideration is given to your long term needs as well as to your short term immediate needs.
Here at Laker Legal Solicitors we specialise in divorce and financial matters arising out of divorce so if you are going through a divorce and require advice and assistance then please contact one of our expert divorce Solicitors for a free initial chat.
