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Pensions need to be considered when negotiating a settlement on divorce

"I'm retired - goodbye tension, hello pension!".  Many think life will be easier on retirement, but what happens when your pension is under attack? Pensions, like all assets need to be considered when negotiating a settlement on divorce. In fact, Pensions can often be the largest asset. So, what are the options?

The cash equivalent value (CEV) is the figure used to value a pension on divorce which each party must obtain from their pension provider. There are 3 ways to address any disparity in the CEVs: 

  • Pension sharing, where a proportion of member's pension rights are shared with the former spouse. The member's rights are reduced by a specified percentage ("pension debit") with the former spouse ('pension credit member') gaining the corresponding percentage. This assists with a financial clean break.
  • "Attachment" where a percentage of the pension member's rights are paid to the former spouse but the member continues to own/control the rights. The order can be varied and ceases on the remarriage or death of the former spouse. It is unpopular as it does not provide a clean break.
  • The third alternative is "offsetting" where the former spouse takes cash in lieu of the pension member's rights.

An Actuary is often instructed to provide calculations on these options, such as the appropriate level of Pension Sharing Order required to provide both parties with the same income on retirement. It may be possible to argue that any claims should be limited to the rights accrued during the marriage.

It is important to seek expert advice. Jayne Turner is a Partner at Ashfords LLP and a Resolution Accredited Specialist in pensions and complex financial remedies on divorce. She is also an Advanced Member of the Law Society's Family Law Panel and an experienced Collaborative lawyer.

Please contact our Disputed Wills and Trusts Team by telephone on freephone 0800 0931336, or by email at willdisputes@ashfords.co.uk for a free, non-obligatory chat to see how we can help you.