Home > Financial > How Divorce Affects a Pension

How Divorce Affects a Pension

By: Chris Nickson - Updated: 18 Sep 2012 | comments*Discuss
 
Pension Divorce Personal Pension State

What are the biggest assets a couple have? There’s property, of course, which remains the biggest of all. But after that, for most couples, come pensions, something many fail to consider when divorce rears its ugly head.

Think about it: most people have a lot salted away in pensions so they can live comfortably after they retire. It might be an investment, but those different types of pension represent a large family asset.

But something many remain unaware of, unless advised by a solicitor, is that the law does allow for pension-sharing. Like other marital assets, such as the sale of the family home, a pension can be split.

It should be stressed – indeed, it can’t be stressed too much – that you need to talk to a divorce lawyer regarding the specifics of your divorce case and the pensions involved. But since 2000, couples who have money in an occupational pension scheme, a personal pension scheme, the additional State pension or a stakeholder pension scheme can share the value of those pensions.

Divorce Rights and State Pensions

Pension sharing doesn’t apply to the basic State pension. That’s secure, and no one can take it away from you. If, however, you didn’t work during the marriage, you can replace your contribution record with that of your partner’s for the duration of the marriage. However, the right to use that vanishes if you remarry.

But the State pension is essentially just a foundation. Millions do live on it, but it’s not an asset of marriage the way other personal pensions are.

Divorce & Personal Pensions

As a general rule, women earn less than men in their lifetimes; it’s an unfortunate but true fact. They may well stay at home to care for the children from the marriage, meaning that they’re not earning for a number of years. In either case they’re unlikely to have the same kind of amount in personal pensions as the husband, so they will be the ones who benefit from using pensions as a marital asset when it comes to divorce.

That said, in cases where the wife has been the bigger earner, it’s the husband who can gain – there’s no discrimination in the courts.

With divorce there are three main options regarding pensions. The family home could be “offset” against other assets – in other words, the wife would receive the house and the husband hangs on to his pension; this is often the case where dependent children are involved.

An alternative is “earmarking,” under which part of the pension is paid to the former spouse when the pension holder retires. It can apply both to ongoing pension benefits as well as lump sums. However, this can be problematic for two reasons. It stops there being a clean break between the former partners, and also, when the pension holder dies, the former partner stops receiving any benefits – even if that death is before pension age.

Much better is the splitting of pensions. This does exactly what it says, and takes the pension, splitting it between the two parties so that they’re independent of each other. It should be noted that a date is set for the split and contributions to the pension after that date are not shared.

In the middle of a divorce it can be hard to look to the future and think of pensions, but they are important, a major nest egg for security when you’re older. Always talk to your divorce lawyer about pensions as assets.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Topics
Latest Comments
  • Wlfred
    Re: Selling the Jointly Owned Home
    Hi, me and my ex bought a house together We put down the same amount of deposit but I have been making all the mortgage payments…
    16 January 2021
  • Tweety
    Re: Selling the Jointly Owned Home
    Hey me and a (guy)friend has a joint bond and living together became a nightmare as his not working anymore I'm 27 and his 57 he…
    28 December 2020
  • Kellyjayne
    Re: Selling the Jointly Owned Home
    Hello, My husband left me at the start of lockdown and we have an 8 month old son. He moved out of the home we both own soon…
    30 November 2020
  • Withheld
    Re: Selling the Jointly Owned Home
    Hi Me and my partner separated 18 years ago now and myself and my 2 kids lived in the house. We were never married but the house…
    19 November 2020
  • Ramos
    Re: Selling the Jointly Owned Home
    Me and wife separated, we do have house under our both name we have two children one 16 and one 13. They do live with her at the…
    29 October 2020
  • Michelle
    Re: Buy Out The Mortgage From Your Ex
    My husband and I are separating he wants to buy out my share of the house. He has sought financial advice and we are…
    27 October 2020
  • Ash
    Re: Selling the Jointly Owned Home
    My ex partner had me arrested to get me out of our home and lied to police. Since I haven’t been back to the home however I have…
    21 October 2020
  • Harbo
    Re: Selling the Jointly Owned Home
    My ex partner has been renting out our ex home together as we are both living with new partner's in different homes. I’m wanting…
    7 October 2020
  • Marlene
    Re: Selling the Jointly Owned Home
    Good evening. My fiance was married in community of property. The house is in joint names as per divorce settlement wife must…
    6 October 2020
  • T.i.oakley
    Re: Selling the Jointly Owned Home
    I have a morgage half buy half rent my ex partner is on the papers but he has been left 12 years and dont know where he is I…
    6 October 2020