When couples go through a divorce or dissolution of a civil partnership, the division of assets is a crucial part of the process. While many people focus on tangible assets like the family home or savings, pensions are often overlooked. However, pensions can be one of the largest assets in a marriage and should be carefully considered during financial settlements. This is where a Pension Sharing Order comes into play.
Understanding Pension Sharing Orders
A Pension Sharing Order is a legal order made by the court that allows for a percentage of one party’s pension to be transferred to the other party. This order is part of the financial remedy settlement and aims to create a clean break between the parties by physically splitting the pension assets. The receiving party will have their own separate pension pot, which they can manage independently.
How Does It Work?
The court has the power to divide both defined benefit and defined contribution pensions, but not State Pension benefits. The percentage to be transferred is expressed as a percentage of the cash equivalent transfer value (CETV) and not as a specific lump sum. This percentage can be negotiated between the parties or, if no agreement is reached, decided by the court.
Once the order is made, the pension provider will create a separate pension account for the receiving party. This account will be in their name, and they will have control over it, subject to the rules of the pension scheme.
Why Pensions Are Often Overlooked
Pensions are complex financial products, and their value may not be immediately apparent. Unlike a house or a savings account, the benefits of a pension are often realised in the future, which can make them easy to overlook during divorce proceedings. However, ignoring pensions can lead to an unfair financial settlement, as they can represent a significant portion of the marital assets.
The Importance of Legal Advice
Given the complexity of pensions and the potential impact on financial settlements, obtaining legal advice is crucial. A family law solicitor can help you understand the implications of a Pension Sharing Order and ensure that all pension assets are properly valued and considered. They can also assist in negotiating a fair settlement or represent you in court if necessary.
Additionally, instructing a pensions expert can be beneficial. They can provide a detailed analysis of the pension assets involved and offer advice on the best division options. This can be particularly valuable during financial disclosure, negotiation, and court proceedings.
To summarise
Pensions are a vital part of the financial landscape in a divorce, and a Pension Sharing Order can ensure that they are divided fairly. By understanding the importance of pensions and seeking expert legal advice, you can achieve a fair and equitable financial settlement. Remember, overlooking pensions can have long-term financial consequences, so it’s essential to address them as part of your divorce proceedings.
Please contact Tayo Taylor our experienced family Partner at tayo.taylor@mhhplaw.com or on 020 3667 4783.
