Tracing Pensions in Divorce Financial Settlements
We are often told by couples that they have an agreement and that they want a financial court order from the family court to reflect their divorce financial agreement as soon as possible. Our family lawyers can understand why you want a quick financial court order with the minimum of fuss and expense. They are 2 laudable aims.
However, as your family solicitor, it is our job to advise you on whether the order you are asking the court to make represents a fair divorce financial settlement. That isn’t always possible to do if pension assets have not been traced before you reached your financial settlement.
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.
Making a fuss about nothing
As family lawyers, we are sometimes told that asking about pensions is making a fuss about nothing but in many families, the pension is the biggest or one of the biggest family assets after the equity in the house. You, therefore, ignore pensions at your peril.
Ignoring the existence of a pension can make the difference between a comfortable retirement or one where you have to consider selling the family home to downsize to release cash or suffering a big drop in living standards. You may have to experience those things even if all pensions are traced and dealt with fairly but at least with full financial disclosure you are confident that the divorce financial settlement was the best you could achieve in the circumstances.
The relevance of pensions in divorce financial settlements
A husband and wife are duty-bound to give full financial disclosure of all assets, including pensions. That’s the case even though the pension is in one of your names and the pension contributions may have been made and ended before you got married.
Although it is important to trace and get pension information your pension may be of limited relevance if you have only been married a year, have no children and have no history of a long period of pre-marriage cohabitation that moved seamlessly from living together to marriage.
In all cases, it is best to disclose all pension assets as that way you can't be accused of failing to provide full and frank financial disclosure as part of the process of securing a financial court order.
Tracing pensions
When your family law solicitor first asks you to provide financial disclosure it is best to contact your pension providers for information as some pension administrators take time to provide the information you need. If you are not sure where to get hold of your pension information and rifling through your old paperwork doesn’t help then you may need to contact your current and former employers.
The UK has had auto-enrolment in workplace pensions for around 10 years so the likelihood is that you have a workplace pension and that your current or former employer (or both) will hold information about your pension providing that you were working in the UK and were classed as a worker, as opposed to freelance or a consultant or contractor.
Armed with your national insurance number, current and old employers should be able to trace your pension. If that does not work then you can use the pension tracing service to locate your old pensions. This is a free government service that puts you in touch with pension providers where you have forgotten the details of either a workplace or personal pension scheme.
Valuing your pension
Once you have chased down all your old pensions, or your spouse has done so in relation to their pensions the next step is to make sure that the pensions are all accurately valued. You may have been married a long time and nearing retirement but assumed pension values are not important as you will each keep your own on the assumption that the pensions will be worth roughly the same amount.
Pension transfer values do not always accurately reflect how much you will each receive in pension income. For example, 2 pension funds with a transfer value of £400,000 will probably pay very different monthly pension incomes if one is a final salary scheme pension and the other a personal pension fund. This imbalance can be offset, where appropriate, with the making of a pension sharing order or pension offsetting. With offsetting, the spouse with the pension with a lower value gets more of a share in other assets to help redress the balance and achieve fairness.
Pension offsetting needs to be considered carefully with your family law solicitor because the short-term gain of extra cash or equity in the family home may not outweigh the long-term advantages of long-term retirement income via a pension-sharing order. For example, if you invested the offsetting cash would that produce the same level of return as a pension-sharing order? These are all things that your family lawyer can help you work through with specialist advice from your pension or independent financial advisor.
Fools rush in whilst others wait for their family lawyer
The adage ‘only fools rush in where angels fear to tread’ is an apt one when it comes to pensions and divorce as so many couples want a financial court order to put their divorce behind them. That is completely understandable but it can be short-sighted because of the long-term value of a pension and the difference it can make to your retirement. That’s why family law solicitors say it is best to be thorough as by doing things properly we can help you achieve a fair divorce financial settlement.
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.
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