Pensions and Divorce

If you're going through a divorce then pension can play an important part of any settlement. For many people it is the second biggest asset after the family home.

There are three options available when assessing the division of assets which include a pension:

Pension offsetting

This method is relatively straightforward. All it means is that one partner's pension is traded against other family assets to give each other an agreed value.

e.g. If a husband has a pension fund of £100,000 and there is joint property held with his ex-wife worth £100,000 and no other assets, it could be agreed that on an equal split of the assets, that the wife retains the house in full and the husband retains the pension.

Offsetting is still quite a common method, and it does provide a "clean break". Much depends on the value of the pension compared to other assets.

Pensions and Earmarking

Earmarking is another method. This can be quite complicated and has a number of disadvantages, and because of this it has not proved to be a common method. Rather than any immediate value being provided to an ex-partner (usually an ex-wife), a portion of the pension is earmarked for their future benefit, when the pension holder (usually the ex-husband) retires.

There isn't a clean break, and the pension holder retains control of the pension. If they're vindictive they could delay their retirement until age 75, or attempt to invest the pension in such a way that it falls in value. 

Pensions Sharing

Pension Sharing is the most recent option available for pensions in divorce. This method does enable a "clean break". What happens is a portion of the pension value is agreed, and this is given to the ex-partner, (usually the ex-wife). Very often a new plan has to be taken out for the ex-partner, as the existing scheme will not want the added complication of another member.

In most instances it is usually the ex-wife who will be given some share of the ex-husband's pension. And for many women this will be their main or only pension. It will also be the first time many women will have had to make a decision about a pension, such as which company to use, what funds to select, and what level of risk they want.

If you're going through a divorce, and want to discuss your pension options, in jargon free, easy to understand terms, with an experienced adviser call us free on 0800 072 5987 or contact us online. 

transferyourpension.co.uk is a trading style of the The Policy Servicing Company Ltd which is an appointed representative of Independent Investment Solutions Ltd, which is authorised and regulated by the Financial Services Authority.
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