New research by the insurance company Legal and General has found that a whopping seven in ten divorcing couples do not share their pensions. This leaves women, in particular, at greater risk of not having sufficient money to live on in retirement.
According to a Which? Survey of 1,000 people who divorced since 2000, one in five of them had not even considered sharing their pension as part of their financial settlement. Pensions can be a valuable asset and are sometimes worth more than the former family home, which tends to be the most coveted asset. Some may be reluctant to divide their retirement pot with their ex-spouse, and the Which? Survey backs this up. Twenty-two per cent stated they did not want to share their retirement savings on divorce.
The reality for many women means that their own pension is unlikely to reach that of their spouse. A combination of women shouldering caring duties and generally earning less during their lifetime means pensions are rarely weighted in their favour. In real terms, women, on average, retire with less than half the pension of a man the same age.
Since 2000, those who divorce can obtain a pension sharing order from the court. This was designed to achieve a fairer financial outcome after separation. However, evidence suggests that many divorcing couples do not realise this is an option or even that pensions are considered a matrimonial asset capable of consideration. A pensions expert is best placed to calculate the real value of a defined-benefit pension, with final salary or high-value defined benefit schemes particularly worth fighting for.
Often, a spouse may not be aware their partner has a pension or may not know how valuable it is. But when people get divorced, they must disclose the ‘cash equivalent transfer value’ (CETV) of their pension to their partner’s solicitor and the court. However, the CETV doesn’t tend to include specific life insurance type benefits, so the real value of the pension could be much greater.
If legal advice is not obtained, it is possible for one spouse to walk away without realising they have missed out. And at least a third of all divorcing couples fail to obtain professional help to sort out their financial affairs.
There are three ways a pension can be split:
1. Pension sharing
This is where retirement savings are split immediately upon divorce, meaning someone could obtain their share of their spouse’s pension straightaway. The amount is expressed as a percentage of the transfer value of the pension that is to be split. For example, if the value of the pension is £150,000, a 50% share would be £75,000. The final transfer value is worked out the day before the pension sharing order comes into effect.
2. Pension offsetting
This is where the pension’s value is offset against other matrimonial assets of a similar value. For example, a spouse could retain their pension, but in return, their partner keeps the former family home. This works particularly well in cases where the assets are of a similar value.
If this route is chosen, someone could still end up without a pension if they have not saved for one themselves. So it is vital to obtain good pension advice.
3. Pension earmarking
This means that a spouse would not receive any money straightaway, but when their partner starts to draw their pension, part of it is paid to them. The court instructs the pension provider to make these payments.
This solution has its issues. If the spouse holding a ‘defined benefit’ pension dies before their ex-partner, there is a real chance they would receive nothing. Additionally, if they retire early on a defined benefit pension, their benefits may be reduced, which means the receiving spouse could get less than expected. Although defined contribution pensions are less complicated to deal with.
It is worth mentioning that under a pension earmarking order, a clean break cannot be achieved. This is because an ongoing link with the other party remains.
State pensions cannot be shared, and anyone who reaches retirement age after 2016, they can no longer use their ex-spouse’s National Insurance Contributions to increase the amount they receive. Anyone receiving their state pension or reaching state pension age after 6th April 2016 will be paid the ‘new’ state pension.
Because of the recent change in divorce law, the new ‘no-fault’ divorce could mean that even fewer couples seek divorce advice and consequently remain in the dark about sharing their spouse’s pension, a situation which arguably presents a financial time-bomb for many women.
Contact our International Divorce Solicitors based in Manchester, London and Birmingham
Our specialist international divorce lawyers will help you every step of the way – we can advise you on all matters related to pensions and divorce. To arrange an initial consultation about divorce, call our specialist Divorce Solicitors on 0330 107 0107 or request 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.
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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