Pensions and Divorce
The Mirror has reported on research carried out by Age UK on women losing pension rights on divorce because they aren’t claiming a share of their husband’s pension fund. This isn’t a problem just affecting a few women. Statistically one in three women aged 55 to 70 experience marital breakdown and divorce. So what’s the reason women are losing out on pension rights on divorce? As a specialist divorce solicitor advising on financial and pension claims on divorce my experience shows there are a number of reasons why pensions aren’t claimed on divorce:
- A desire for a speedy settlement as people don’t want to wait for up to 3 months to get what is known as the cash equivalent transfer value of the pension fund before reaching a financial agreement;
- Being told by a spouse that the pension pot is only small and not worth bothering about – that may not be the case .Sometimes even if the pension fund value is relatively small it can still generate a reasonable pension because of the nature of an employer pension scheme;
- Being told by a spouse that the pension pot isn’t relevant to the divorce as the pension contributions were made prior to the marriage – that may not be relevant if you lived together before your marriage or if your ‘’needs’’ mean that you should share the pension fund;
- Being told by a spouse that the pension can’t be shared as the pension can’t be accessed until retirement – if a pension fund is shared at the time of the divorce and financial Court order then you will get a pension sharing order. The implementation of the pension sharing order and your decree absolute of divorce ensures that the agreed percentage of your spouse’s pension fund becomes your pension fund;
- Being told by a spouse that the pension can’t be shared as it is a company pension scheme – that isn’t correct as although ( depending on the company pension scheme rules ) you may not be able to become a member of the company pension scheme you will be able to invest your share of the company pension scheme in a private pension fund;
- Being told by a spouse that you don’t need a share of the pension as you are getting spousal maintenance payments each month – spousal maintenance will stop if you remarry or your spouse dies. A share of a pension fund and retirement income won’t stop if you remarry or your ex-spouse dies. If you get spousal maintenance from an ex-spouse you can still claim a share of the pension fund – often the spousal maintenance will stop or reduce when you can access your share of the pension fund;
- The priority being to keep the family home or to get more than half the proceeds of sale of the family home in lieu of getting a share of the husband’s pension – that is fine provided that the pension fund has been valued expertly so you know the value of the asset you are giving up a claim to and you have thought how you will manage financially in later years if you forgo a share of the pension.
Pension rights and advice
If you are separating it is really important to get advice before you sit down with your spouse and reach a financial agreement. Why? Well I am all for couples reaching an amicable agreement over how to split their assets, house and pensions but if you don’t have an idea of what you are entitled to the agreement may not be fair. Although you might be able to renegotiate after you have taken legal advice from a divorce solicitor it can be harder to do so when ideas have become fixed and your spouse is of the mind-set that he’ll be keeping the pension.
Pension rights and reality checking
As well as getting legal advice it is also important that you get financial advice on your financial options and reality test any financial settlement. I am often told that the priority is to keep the family home but that can come at the price of a good retirement income if a spouse’s pension fund isn’t expertly valued or if the planned eventual down size of house isn’t reality checked to see if the sale of the family home is likely to raise enough cash to generate a retirement income.
Although everyone wants to reach a quick agreement and move on with their lives sometimes it is just as important to get the information you need to value assets, get impartial legal and financial advice and then take the time to reality test and reflect so that your financial settlement includes provision for your retirement.