A pension can often be the biggest asset in a divorce apart from the family home. We’ve previously discussed the complexity of assessing the value of a pension and dividing it during a divorce. Ensuring fairness when it comes to pensions and divorce is a fine balancing act. So the publication this month of a comprehensive guide to the treatment of pensions on divorce is a useful addition to the existing information currently available.
Why Publish The Guide To Pensions Now?
The guide, published by the respected Pensions Advisory Group, is a response to the perception that there has been a growing inconsistency across the courts of England and Wales in the way pensions are treated on divorce.
As one of the authors of the report highlights, five out of six divorce settlements don’t incorporate a pension share. In some ways therefore the guide is an attempt to simply get people to think properly about pensions when they divorce and to appreciate how a failure to deal with them could result in future financial hardship.
Ultimately the inconsistency has led to unfairness, particularly toward the non-pension owning spouse. In our experience at Brookman in London it’s clear that individuals going through divorce are often unaware of their pension rights or how to begin splitting pension assets. Added to this, family judges have had to remain up to date with recent changes in pensions law. These for example give pension holders much greater freedom to access the underlying pension funds at 55.
Who Is The Pensions Guide Aimed At?
The guide is primarily geared toward family lawyers and judges. But it also hopes to directly assist individuals going through divorce, providing them with the tools they need to begin deciding how to approach the issue of their own or their estranged spouse’s pension on divorce. It includes information on areas such as:
- How to approach pension valuations when there is a large income disparity between spouses
- How to gather information on all pension benefits, including state benefits and death benefits
- How to approach complications in pension valuations, such as when a defined benefit pension scheme is in place
Pension Attachment Orders: A Warning
A pension attachment order redirects part or all of a pension holder’s benefits to the ex-spouse when it comes into payment. As the guide points out such orders are rarely made today except in exceptional circumstances. However the Pensions Advisory Group does identify a significant danger in relation to attachment orders made in the past and the new pension law changes we mentioned above.
Because pension scheme administrators are still getting to grips with how to interpret old attachment orders in light of the new pensions freedoms some pension holders have managed to withdraw their entire pension before the attachment order kicks in.
According to the report there is evidence that some non-pension owning spouses have only discovered the pension pot is empty when it’s too late to recover any of the funds. As a result the group has urged anyone with the benefit of a pre existing attachment order to seek urgent legal advice.
If you have an existing pension attachment order and you have concerns that your ex spouse may try to access the funds before the order comes into effect we would be happy to offer guidance.