Pensions On Divorce Or Civil Partnership Dissolution

• Published date: 11 July 2023
• Subject Matter: Employment and HR, Family and Matrimonial, Retirement, Superannuation & Pensions, Family Law, Divorce
• Law Firm: Weightmans
• Author: Fiona Davidson and Lucy Phipps

A guide on everything you need to aware of regarding pensions on divorce and civil partnership dissolution.

On divorce or dissolution, both parties are entitled to a fair and reasonable financial settlement based on the resources available, which include pensions.

In many cases, a fair division of all the assets, including pensions, can be achieved without complications, provided couples have the necessary legal information to be aware of all the options available to them. But taking expert advice can be key.

How is a financial settlement dealt with generally?

On divorce or dissolution, there will be a review of the parties' financial assets and a division between them in accordance with what is considered fair. Pensions are part of this assessment and the starting principle is that any contributions made to pension funds during the marriage should be divided equally between the parties.

How do pensions get split when you divorce?

Every pension that you and your spouse has will be valued, regardless of whether part of that pension was accrued before the relationship or marriage. That value will then be looked at together with other assets such as property and savings and there may be apportionment arguments - see below.

Although the usual starting point for asset division is sharing, and so an equal split of the assets between you, there are many reasons why this may not be fair or appropriate. Each divorce settlement is different, and how pensions are treated will vary from case to case. For example, you may wish to retain a property rather than receive a share of your spouse's pension.

What is a pension sharing order?

After you have worked out how much of one person's pension is to be paid to the other, a pension sharing order will be made by the court.

A pension sharing order takes a percentage from the pension fund of the wealthier party (pension debit) and transfers it into a pension fund belonging to the less wealthy party (who receives a pension credit). The two pensions then stand alone and the parties are free to deal with them as they see fit, completely independent of the other party.

What is pension offsetting?

This is the term used to describe taking other assets instead of a pension share. This situation commonly occurs when one person wishes to retain a house and the other wishes to retain their pension.

The values of each are worked out so that they can 'offset' each other. It is possible to do a partial offset if the values aren't...