Do I Have to Share my Pension on Divorce?
If you have been paying into your pension for the last 20-plus years then understandably you will want to keep your pension intact on divorce.
In this blog, our Family Law Solicitors answer your pension questions.
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For family law legal advice call the expert London family lawyers at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.
Our lawyers speak Arabic, Armenian, Farsi, French/Mauritian Creole, Spanish, Tamil Tagalog/Ilonggo, Urdu/Punjabi
Is my pension safe from a divorce claim?
A pension is a retirement investment that is in your sole name. As it isn’t joint with your wife or husband you may assume it is yours to keep if you separate or divorce from your wife or husband.
The law is more complicated than that. If one of you starts divorce proceedings you can apply to court for a financial court order for the court to decide how your assets should be split with your partner. The court has the power to order the sale or transfer of assets even if they are owned in your sole name. Therefore, the court can share your pension by making a pension sharing order or can take the value of your pension into account when making the financial court order. They can do this by giving your spouse more of the non-pension assets because you are keeping your pension.
Is a pension ever safe from a pension claim in financial court proceedings?
You may have been told that your pension is safe. However, in every divorce financial application, the court will consider all the family assets and ‘non-family’ assets when working out what financial court order is appropriate to make.
The court divides the family assets up in a way that it considers a fair distribution between husband and wife. That could be an equal or unequal split. The court can also share or divide up ‘non-family’ assets if the court thinks it is necessary to do so because they are needed to meet the children's or the husband's or wife's needs.
Most pensions are classed as family assets even though your pension is in your name and not a joint investment. No pension is therefore ever totally safe from the risk that its value will be taken into account or that it will be shared as part of a divorce financial court order.
There are some situations where your pension may be ‘’safer’’ from a financial claim. These include:
- A short marriage
- A prenuptial agreement or postnuptial agreement excluded the value of your pension from the financial settlement
- The pension was paid into before you met your husband or wife so you can argue it is a pre-marriage or non-family asset
No pension is ever truly safe from a pension claim as a spouse can argue that they need a share of your pension. Here are some examples:
- You have been married for six years but you are both nearing retirement. You are financially comfortable and have a generous pension provision. If your pension isn’t shared your spouse will need to claim pension credits so has a needs-based argument for a pension sharing order
- Although the pension was paid into before your marriage the marriage has lasted for over 20 years
- The prenuptial agreement gives 100% of all the assets and pension. The court may hold that the terms of the prenuptial agreement are not fair and make a financial court order that is not fully consistent with your prenuptial agreement
What is the best way to protect your pension in a divorce?
The first thing you need to do is take legal advice from specialist Divorce Solicitors. They will give you sensible but expert legal advice on your options and the likelihood of your being able to protect your pension in your divorce.
Some people think their pension will be protected because it is a final salary pension or a SIPP or their pension is in property as part of a family business arrangement. None of those pension arrangements guarantee that your pension will be left alone.
Others think that their pension can't be touched because it is in payment. However, even if you receive a pension income the court can make a pension sharing order.
If, in your personal and financial circumstances, it won't be possible to fully protect your pension from a pension claim your Family Law Solicitors will work hard to:
- Make sure your pension is properly valued in the divorce financial settlement. For example, if your spouse has a final salary scheme pension and your pension is a private pension scheme but, on paper, your pension has a higher value than your spouse's fund it may be best to get a pension actuary report. An actuary may conclude that you should keep all your pension and even get a share of your spouse’s pension as their pension fund has not been accurately valued in the cash transfer value provided by their pension administrators
- Help you decide if your priority is to keep all your pension or to offset the value of your pension. With pension offsetting your husband or wife gets a bigger share of other assets, such as over half of the equity in the family home. You may initially be keen to keep all your pension pot but you don’t want to end up with a financial court order that leaves you pension-rich but house-poor. Whilst keeping your pension is important it is equally important that you have enough to provide you with a deposit so you can rehouse yourself
- Ensure you understand your options. For example, you could offer to pay spousal maintenance out of your pension if your pension is in payment. That may be a sensible solution for you if your spouse is in poor health. In other situations, it may be a bad idea as your husband or wife could apply to the court to increase the amount of their spousal maintenance payments or they could later ask the court to capitalise their spousal maintenance and make a pension sharing order instead of monthly maintenance
- Make sure that you have the information you need to make an informed decision about your pension and the wording of your financial court order. That’s because most couples negotiate a financial settlement rather than leave it to the court to make a financial court order after a contested hearing. Accordingly, you need to think about what you are comfortable to negotiate. If your pension is nearing the pension lifetime allowance it may be better for you to agree to a pension sharing order so you don’t hit the limit before retirement. If a pension sharing order is made but you get half the equity in the family home will this free up your salary to make ongoing pension payments to build up your pension fund as you will have lower mortgage payments? These are all things to consider with an experienced Family Law Solicitor
Online and London Family Law Solicitors
For family law legal advice call the expert London family lawyers at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.
Our lawyers speak Arabic, Armenian, Farsi, French/Mauritian Creole, Spanish, Tamil Tagalog/Ilonggo, Urdu/Punjabi
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