What happens to pensions when couples divorce?14-May-2019

By Susan Alexander, Consultant Solicitor, Family and Mediation

Pensions are often a very valuable asset in a marriage, sometimes the most valuable asset, exceeding the equity in the family home, so making informed decisions about what to do with them is essential – especially when planning for the future. A decision about how a divorcing couple’s pensions are divided is called a “Pension Sharing Order”.

Pension sharing orders have been available for almost 20 years and allow a pension to be divided at the time of the divorce so that both move on with separate pension funds. It is not possible to have a pension sharing order without a divorce and a pension share is only effective on decree of divorce being made absolute.

When a pension sharing order is made, a percentage of the benefits/funds transfer from the scheme member to their ex-spouse. Depending on the pension scheme, the pension credit will be transferred into a new scheme or kept within the same scheme but transferred into a pot – in the sole name – of the recipient. The allocated share then becomes the property of receiving ex-spouse, independent of the original pension scheme member.

Pension sharing passes pension rights irrevocably to the receiving ex-spouse and once the order is in place, rights in the pension fund belong to the receiving ex-spouse. The pension sharing order is not affected by either party re-marrying or the death of the original scheme member.

A pension sharing order ensures that both parties have pension plans in place, however, access to the pension benefits remain restricted until the specified minimum age. In addition, they are determined by the pension scheme rules, government legislation and may be liable to tax.

If you are faced with marital breakdown or divorce it is important to take specialist legal advice, especially if you have a pension or other assets in place.

For more information about our Family Law services, please contact a member of the Family Law team on 01244 356 789 or email info@cullimoredutton.co.uk

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.