Advice Centre

Pension Sharing On Divorce

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Posted in: Divorce, Family and children
Date published: 16/01/2020
Pension Sharing On Divorce

When couples separate and divorce, part of that process will involve dividing the assets from the marriage and making two households out of one.  Pension sharing on divorce is very much part of this process.

Dividing Matrimonial Assets

‘Dividing up cash, savings and the family home are relatively straightforward,’ says Iwona Durlak, family law expert with IMD Solicitors LLP in London.  ‘In contrast, pensions are the most complex asset to distribute, and are often overlooked.’

Pension Sharing On Divorce

Pensions can be shared just like any other marital asset.  However, the share of the pension cannot usually be made available immediately but will provide some pension benefit in the future.  In addition, there are a variety of types of pension schemes with differing approaches to calculating the eventual pension payments. 

One key difference arises depending on whether a scheme is based upon defined contributions (for example, a private pension into which a set amount per month is paid into the fund), or a defined benefit scheme (for example, a final salary pension scheme), which is calculated by a formula based on the earnings history, years of service and age, rather than depending directly on individual investment returns.

Alternatively, experienced investors or company directors may have a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) which might include a portfolio of assets such as commercial property, woodland, shares and business investments. 

It is perfectly possible for a couple to have pension funds of the same size but differing predicted monthly payments, even if they both work in the public sector.

Valuing The Pension

The starting point is to contact your pension provider to request an up-to-date valuation of your pension or pensions – one is required for each pension you have.  This is straightforward and a telephone call to your pension provider is usually sufficient.  You will then receive a written valuation (or CEV) in respect of the pension, which says what the pension fund is currently worth and your expected pension payments.

For most private pensions, that valuation will usually be sufficient to provide accurate information to allow you to determine long-term arrangements.  However, the picture is far from straightforward for SIPPs, SSASs and defined benefit public sector or armed forces pension schemes.

In these cases, the CEV may not be a true valuation of the pension fund.  This is not because of anything untoward, it is simply to do with how the calculations are made, and the CEV provided may be lower than the actual value of the pension.

This can arise for a number of reasons, as demonstrated in the following scenarios:

  • If the defined benefit is calculated based upon length of service of the serving spouse, the difference can be significant. For example, where the wife is a serving police officer who has 24 years and 364 days service, her pension provider says she has a CEV of £250,000.  However, 24 hours later, when she has attained 25 years service, that pension may be worth £350,000.
  • Where the pension fund includes property investments, values may change significantly particularly if planning permission for development is obtained.  An acre of agricultural land may be worth £20,000 today, but with planning permission for a solar farm or a business park, its value could increase tenfold.

The Benefit Of An Actuarial Valuation

A pensions actuary will be able to provide an accurate valuation of the pension fund and expected payments. Unfortunately, an actuary’s report can be expensive, and often couples are put off by the cost and feel that the size of the pension does not justify the expense.

However, as can be seen in the example above, the true value of a pension can be significantly higher than you might initially be led to believe.

Pension Sharing FAQs

Can I claim against a pension that is already in payment?

Yes!  Just because your spouse is already receiving their pension, it does not mean that the pension fund cannot be shared.  However, it may be necessary to obtain an actuarial report to assist with calculating the appropriate percentage split.

What about state pensions?

It is possible in certain circumstances to have a pension sharing order against your spouse’s state pension – this might be particularly relevant if one party has not worked sufficiently to build up their NI contributions and so is not eligible for the full amount of the state pension.

Offsetting

In some cases, it might be preferable to keep the pension intact and provide one party with a larger capital sum.

For example, when one person earns little they might struggle to raise a mortgage to buy a house. If the higher earner has a large pension pot, they might prefer to keep the whole of the pension and (subject to appropriate valuations) give their spouse more capital in exchange.  This is known as offsetting, however, pensions and capital cannot be compared on a pound-for-pound basis.

As can be seen, pension calculations are complex, but your financial security in your old age may be at stake and so it is vitally important to seek professional legal advice from a solicitor who will be able to explain to you in more detail about how to share any pensions and how to obtain accurate valuations.

Our Family Law Team Can Help With Pension Sharing In A Divorce Settlement

Our expert Family Law team can help with pension sharing and Divorce Financial Settlements. Contact Iwona Durlak in the family law team on 0330 107 0107 or arrange a call back.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Published by:

Iwona Durlak Senior Partner

Family Law – IMD Solicitors LLP


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Example of cases we have dealt with:

F v F - Acted for a German husband in a complex financial remedy matter. He decided to instruct IMD Solicitors after he had lost trust in his previously instructed solicitors and feared that he would not achieve a favourable outcome from the proceedings. The relevant assets were spread across the globe with some located in the UK (including a multi-million pound business), Gibraltar, Spain, Dubai, and Poland. The overall value of assets exceeded £24 million. The husband had been cut off from the matrimonial assets and excluded from control of the business that had been established by his family. The case involved the instruction of numerous experts, for business valuations, Capital Gains Tax reports, and opinions on the enforcement of orders in foreign jurisdictions, and dealing with several applications, including applications for orders to freeze assets, prevent the disposition of assets, for the joinder of parties, and to litigate conduct issues. The final result exceeded the client’s expectations.
L v L - We were instructed by a mother in a complex international children matter. She was required by orders of the UK courts to return the child to the UK from Poland. She had travelled with the child to Poland but, following unsuccessful application to extend her stay there in August 2017, she decided not to return to the UK because the child disclosed sexual abuse by a member of the paternal family and the father. In September 2018, the Polish court dismissed the father’s Hague Convention application for the child's return on the basis of Article 13(b), a decision which the father appealed. In March 2019, the father applied to the UK High Court for an order for the child’s return pursuant to the procedure set out in Article 11(6) – (8) of the Brussels IIA Regulation. Despite the father's unsuccessful Hague Convention application in Poland, the UK court ordered the return of the child. Article 11 does not allow the court of the returning country much discretion. After all of this, the mother instructed IMD Solicitors to apply to discharge the orders of the UK Court for the return of the child. Even in the face of the fact that most applications to discharge such return orders fail, we succeeded. We are currently awaiting a decision in the UK courts on a further application for the transfer of jurisdiction to the Polish courts where the mother resides with the child.
G v P - We represent a Spanish mother in respect of an urgent application for a Child Arrangements Order and Specific Issue Order in the UK seeking the relocation of the child to Spain. This was after the return of the child to the UK under Hague Convection proceedings which this mother lost in Spain. She was asking for an order for the relocation of the child back to Spain and an urgent interim Child Arrangements Order to allow her to see the child pending the final outcome of the UK proceedings. IMD successfully argued that, regardless of the return of the child to the UK under the Hague Convention, the mother should be allowed unsupervised overnight contact with the child. We were delighted to be able to secure her contact with the child for Christmas and she said that it was the best Christmas gift she could have wished for. The outcome of the application for the relocation is pending.
S v V - We currently represent the father in Child Arrangements Order proceedings issued by the mother in relation to variation of a UK order made in the face of numerous other international proceedings. He is an Italian National who has been living in France for the last 20 years and the mother is a Lithuanian national. The child is now 11 years old and proceedings concerning the child have been ongoing in various jurisdictions for the majority of the child`s life. Contested divorce proceedings including child arrangements took place in Monaco. The French Court and authorities were also involved, and various proceedings had been ongoing between parties since 2013 in France and Monaco. The parties’ divorce was pronounced in Monaco. Thereafter, in December 2020, the mother submitted an application to relocate to England with the child, and the relocation took place in June 2021. Upon relocation, the she lodged a child arrangement order application, seeking to register a judgment made in Monaco and to vary the same in respect of the contact arrangements between the father and the child. The father seeks for the child’s return to Monaco. Due to the parties’ mutual allegations and the associated international elements, various authorities and courts that have been involved in the case, the local authority has become involved with the family and a guardian has been instructed to represent the child in the UK proceedings. At present, these proceedings in England are ongoing and the outcome of the professional reports regarding the family are awaited.  
P v P - We have acted for the Respondent Husband in relation to the financial remedy proceedings in the UK. The parties had various assets in the UK and Romania consisting mainly of the portfolio of properties but conduct issues were raised by the Wife due to a business of the Husband over which she had lost control and her allegations of dissipation of assets. The value of assets excluding the business were in a region of £3 million. 
K v K - We act in financial remedy proceedings for a wife who is a Polish national. The matter's complexity mainly comes from a dispute between the parties around land in Poland. Its value was initially in dispute but was then assessed by a joint expert to be in the region of half a million pounds. The total assets in this case are estimated to be worth over £1 million. The land in Poland is a subject to contract with a third party and is being leased as a photovoltaic (solar) farm. The division of the land to achieve an equal share of the assets is complicated due to the contract in place and plans for the future use of the land. Currently the parties are awaiting a final hearing but efforts are being made to reach a settlement with the aid of alternative dispute resolution and in order to save the parties money and avoid further delays.
R v O - We acted pro bono and worked together with a law firm in Poland to ensure that the Costa Rican Mother regains access to her child. The Mother's only child was abducted from the UK in 2014. The Mother was successful with the abduction case and the UK family courts ordered the return of the child. The orders were recognised in Poland but unfortunately due to various issues with the Mother's immigration status and court's delays in Poland, the orders were never enforced. The Mother was facing removal from the UK and prospects of never seeing her child again. We have corresponded with various courts in Poland dealing with international abduction matters and we decided that an application for contact should be issued rather than any proceedings for further enforcement of the orders, as the Mother had not seen the child for around 7 years. At the same we secured the Mother's stay in the UK making successful outside of immigration rules application to extend her stay. We now receive regular photos from the Mother with her daughter, as face to face contact is taking place. We helped to secure an order of the Polish courts for the Mother to see the child regularly in person, whilst when she instructed us she was facing a prospect of never seeing her child again and being deported to Costa Rica.

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