Why can my spouse claim on my pension?

Family courts have the power to distribute marital assets when dealing with divorce, nullity, judicial separation or dissolution of a civil partnership. 'Marital assets' include those acquired or built up over the course of a marriage, even if on paper they are only in one spouse's name. This may seem daunting at first when you think about what assets you own in your sole name.

Marital assets can be (to name a few) property, bank accounts, business shares and of course pensions, the subject of this article. Let's examine why your spouse potentially has a claim on your pension in a divorce.

The importance of pensions in a divorce settlement

The pension can often be one of the significant assets when it comes to a marriage breakdown. Your pension is treated as an asset of the marital pot when considering the financial separation element of your divorce. This applies both ways in the sense that your spouse has a claim to your pension and you have a claim to theirs.

The court will look at the substance of a claim to the pension. The court does this as sometimes there can be a difference between spouses' pension provision and the value to them. An example of this is where a spouse has taken a career break to raise children and may not have equal provision in their pension pot to that of their spouse. The court can look at whether this discrepancy between pensions should be balanced up in the context of a divorce, so that the spouse who contributed to the marriage by raising the children is not left worse off for this decision. This is dependent on each case and the circumstances.

How are pensions separated during a divorce?

There are different types of orders available to address pension sharing or separation, such as pension offsetting, pension sharing and pension attachment orders. Spouses and their solicitors can negotiate and agree these orders voluntarily ('by consent') or a court can impose one if the two sides cannot reach a resolution.

 An example of pension offsetting could be that you offset your pension pot against the value of other assets held between you. A cautious approach should be taken when considering pension offsetting as one pension asset may not provide the same benefits as another, therefore what appears an equal offset may not be. This is because pension values are not easily defined in simple cash terms.

Our team can advise you about the full range of options available when dealing with pensions. There can be many implications where dealing with the pension asset and we find that each person requires bespoke advice on the possible outcomes, particularly as there are so many types of pension schemes and benefits which resemble pensions.

The value of a defined benefit pension is very different to that of a defined contribution pension, for example, and we would advise divorce clients differently depending on their life circumstances as well as the notional value of the pension pot.

Can you advise me on how my pension will be affected if I get divorced?

We certainly can and we know that it can sometimes be difficult to understand what pension rights you have. We would look carefully in particular at whether your pension or your spouse's should be treated as capital or income for the future. We would also recommend working closely alongside a financial adviser to get the right outcome for you and we have strong connections with highly skilled and trusted pension actuaries that we work with on a regular basis.

For further information, please email me on [email protected] to arrange a consultation.