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Pensions and divorce

Pensions and divorce

During a marriage, one partner's pension can outgrow the other. During the marriage this isn't a problem, but if the marriage ends, you are no longer entitled to a lump sum or income on your partners death or retirement, and this can lead to inequality in the standard of living you can expect in your old age.

What happens to your pensions when you get divorced?

Throughout a marriage both husband and wife will have worked on the basis that on retirement they will both enjoy spending the lump sum they will receive on the retirement of one, and the income from that pension. If the marriage ends however, they are no longer entitled to a lump sum on the other’s death or retirement or to the income from the other’s pension.

It is often necessary then, on divorce, to try and balance out this potentially huge inequality. There are various ways to achieve this which are:-

  • By payment of spousal maintenance, which ceases when the owner of the pension dies
  • Pension earmarking orders (which again ceases when the owner of the pension dies)
  • Pension sharing orders
  • One-off payments to help the one with lesser pension provision to offset the loss of their interest in the other’s pension scheme on divorce.

Valuing a Pension 

This is an inexact science but the Courts and Solicitors generally rely on Cash Equivalent Transfer Values. We recommend that you request this from your Pension providers as early as possible as it can take some months to obtain this.

Pension Sharing

Within divorce proceedings the Court can make an order providing that a share in one party’s pension scheme can be paid into a pension scheme set up for the other.

Offsetting

A Pension scheme is one of several assets in a marriage. If one party to the marriage keeps their pension it may be appropriate for the other to keep a higher percentage of the other assets in the marriage, to provide them with alternative resources on retirement.

The significance of pensions in divorce varies depending on the length of the marriage, how close the husband and wife are to retirement, and difference in value between their respective pensions. Pension sharing orders are just one of the options open to the Court and the parties when deciding on a fair overall settlement.

Mary McEvoy
Partner and Head of Divorce and Family Law and Notary Public
Beth Woodward
Partner - Divorce and Family Law
Layla Qureshi
Trainee Solicitor
Iain MacAskill
Solicitor - Family Law