MoneyWeek- divorce day and pensions

Solicitors often have a blind spot when it comes to pensions. Situations where one party (normally the woman, to be frank) has been given a poor deal, are common. DB pensions in particular are complicated and can require a specialist actuarial report to determine a fair split.

Specialist required! That is my recommendation when it comes to dealing with pensions in divorce. Even with the latest edition of the PAG report out it is surprising how many lawyers still struggle with pensions in divorce proceedings. Part of this struggle is down to the pragmatic nature of family law. Whilst the case law is based around large money cases most divorces involve far more modest sums where means become the primary concern and hence outcomes are not text book results.
It is now common practice to obtain actuarial reports for defined benefit pensions - something not typically done by separating partners not using lawyers. However even instructing reports requires knowledge, for example how age projections at different ages can result in different outcomes.
With pensions freedoms there has been a growing case for DC pots to be treated the same as any other saving for the over 55. DB pensions in payment are more akin to income.
In short do not try this at home!

Pensions are really important to consider when dealing with divorce and financial settlement. You should consult a lawyer or professional as pensions are not calculated the same way as a house or business.

Pension valuations will show how much there is in a pension "pot". Lawyers or pensions experts can work out what each party would be entitled to. There is law specifically for how pensions are dealt with.

A typical outcome for a couple where one has a large pension and the other person didn't work and the marriage ends after 20 years; the person who didn't work and has no pension can be entitled to at least 50% of the pension within those 20 years. The circumstances are different for every couple but it is always worth talking about.

Pensions can be shared in divorce whether the person has retired or not.

Pensions are a significant family asset for many couples yet they can be overlooked or not properly accounted for in divorce proceedings. This can have serious consequences in later life especially if there was a lower-earning spouse for a large proportion of the marriage. Pensions deserve careful attention in the divorce process, there are usually 3 options to consider - offsetting, earmarking or sharing. The right option will depend on the pension scheme itself and the circumstances of the divorcing couple. Working with a financial adviser can help you in many ways when divorcing and is mandatory when effecting a pension sharing order.

Despite comprehensive information provided by the Pensions Advisory Group research shows that couples frequently fail to obtain pension sharing orders upon divorce. In January 2022 Which magazine reported that only 15% of divorcing couples included pension sharing in their settlement and 58% did not discuss pensions when divorcing. In May 2023 research by Aviva showed 1 in 6 people did not know that a pension share was available when splitting up and one third made no claim. The fact is that courts will consider a pension sharing order equalising either the capital value of the parties' combined pensions or an order equalising their income upon retirement. As pensions vary greatly an expert report is usually required. As with any expert, the questions asked are vital. This is an area where separating parties gain real value by having the best expert they can afford on their side.