November 19, 2020
As part of the process for obtaining a divorce or dissolving your civil partnership, you will need to reach an agreement with your spouse or civil partner about how your financial assets should be divided between you.
Pensions are often very valuable assets, and given that their values change over time, complex calculations may be needed to determine whether they should be divided between you and your spouse or civil partner, and to what extent they should be shared to ensure fairness. To do this, you may need to instruct a pension actuary who will be an expert on pensions, to consider the pension valuations and prepare a report setting out the options for sharing.
Once you have received the report, the information can be used to negotiate the financial settlement with your spouse or civil partner. It may be that you receive a greater share of other assets such as the sale proceeds from the sale of the family home in exchange for not receiving a share of your spouse or civil partner’s pension. This is known as offsetting. Alternatively, you may receive a share of one of their pensions. This is known as pension sharing. The outcome will depend on your circumstances and can change greatly depending on the specific facts and the assets you each have.
In July 2019, the Pension Advisory Group published a report called “A Guide to the Treatment of Pensions on Divorce” (the “PAG Report”). The report can be accessed here:
The PAG Report is very detailed and is an important reference when making decisions about pension sharing. It provides guidance about pension expert reports and indicates that a report may not be required if one of the following situations applies:
- All of the pensions held by you or your civil partner are defined contribution pensions and you are both of a similar age. A defined contribution pension is one with a pension pot that is based on how much money is paid in, usually by you and your employer.
- You are both under 40 years old.
- You have a reasonable amount of money which can be shared between both parties to adequately meet your financial needs and your pensions are only a small proportion of the total assets owned by both of you.
- Where the combined pension assets held by both you and your civil partner are worth less than £100,000.
- Where the only pension is a non-uniformed service public sector defined benefit pension scheme, such as if you or your civil partner have a pension because you are a teacher or work for the NHS.
Even if one of the above situations does apply, a pension expert report may still be required. The costs of obtaining a report are usually shared between you and a quote will be obtained prior to any instruction being confirmed. As pensions are a very complicated area of family law, you should seek legal advice before making a decision about whether to instruct a pension actuary or whether your pension should be shared with your spouse or civil partner.
Wallace Robinson & Morgan Limited are based in Solihull & Dorridge and serve clients across Birmingham and the West Midlands, Warwickshire, Worcestershire and further afield. Our team of Family Lawyers are happy to help if you would like advice about pensions or agreeing a financial settlement.
If you would like to discuss your matter, please call 0121 705 7571 and ask to speak to a member of the Family law team or email us at firstname.lastname@example.org .
This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.