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Five Reasons Why The Pension Is An Important Asset During A Divorce |
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1. Initially the Form E that both spouses complete setting out their financial position includes the CETV value for each pension. In practice the CETV may need to be questioned as in some cases the true value of the pension may be significantly more e.g. final salary and occupational pensions such as the NHS. In other cases the CETV can be misleadingly high because it does not take into account the fact that tax will be payable on 75% of the value. It is important to have appropriate pensions advice, particularly if the pension assets are significant.
2. It is not unusual for one person to have a larger pension than the other but for the couple to have intended this asset to provide for them both in retirement. Within divorce proceedings it is possible to share UK pensions so that the spouse who has less, or no pension, receives their own pension pot to use for his/her retirement.
3. The pension can be offset against other assets. If one spouse is keen to keep the house but this comprises all the liquid capital in a case, all is not lost if there is also a pension asset. It is possible to offset the value of the pension so that the person who retains the benefit of the pension has less of the capital that is available to be divided. In some cases, depending on the funds available, it is possible for one person to keep the pension and the other the equity in the property with no further provision needed. Again it is important to have proper advice as to what offset calculation is appropriate.
4. In some cases, even where the pension is not being shared, it can be used to provide an income for both spouses in retirement with maintenance being paid from pension income. Maintenance orders normally continue until remarriage when they cease and can reduce to a nominal amount in the event of cohabitation, if this is felt appropriate.
5. Pensions can provide additional options where a couple are close to retirement age, for example taking the lump sum sooner than planned to release capital to rehouse. The pension sharing order is then made afterwards to provide an income stream for both parties. Again, it is important for both to have financial advice if this option is being considered.
To conclude, pensions should be properly considered in any divorce settlement. In some cases it is possible to exclude from the matrimonial pot pension that has accrued outside of the marriage (particularly if this is not required to meet the other spouse’s needs). Where a pension is a matrimonial asset it is important to consider whether offsetting, pension sharing or ongoing maintenance from the pension is the most appropriate option, taking into account the individual circumstances.
Written by Kirstie Law Solicitor, Collaborative Lawyer and Mediator
at Thomson Snell & Passmore. Visit www.ts-p.co.uk for further information. |
