In my role as a family law solicitor, I often find that clients are confused by pensions and are reluctant to deal with or consider either their own or their ex-partner’s pensions when separating or divorcing. Given that there are so many different types of pensions and specific rules attached, it is not surprising that clients regularly say “oh let’s just leave it” or “we have agreed that we are not going to touch one another’s pension”.
I have also found that there is often a general view that people feel their pensions do not need to be considered when separating. I frequently hear clients say “I have been contributing to my pension long before I met my husband/wife, so they should not be factored in”. However, this is not necessarily true and a reluctance to consider pensions when separating can prove costly.
Pensions are often a key asset in a marriage and certainly not something that should be ignored. When considering the financial consequences of a marriage breakdown, the whole of the 'matrimonial pot' is to be considered and distributed fairly, which includes both yours and you ex partner’s pensions.
What is a pension, and should my pension be considered when divorcing?
Pensions are effectively a long-term savings account which you will benefit from when you are older.
There are two types of pensions, State Pensions and Private Pensions. To put it simply, a state pension is provided by the Government and you contribute to your state pension via your national insurance payments. Your state pension is received when you reach your state pension age which for me, is the grand age of 68! Private pensions are set either by yourself or by your employer and there are numerous types of private pensions available but in general, a private pension is a savings account which you and your employer pay into and again is a way of saving for your retirement.
Why are pensions important?
Pensions are an important part of your financial planning as they provide a source of income to you when you stop working. For some, this may seem a long time away, however, it is important to make sure that you are financially secure later in life and the sooner you start investing in your future, the better. Whilst your pension may not be at the top of your priority list when separating, disregarding them could prove detrimental as without an adequate pension pot you may face financial difficulties when you retire.
"According to a recent study completed by The Telegraph, the average pension fund value for an individual living in the UK is £61,897 which would provide a saver with around £3,000 per year in income based on current annuity rates.
It’s estimated that the average saver would ideally like approximately £18,000 per annum from their personal pension arrangements once they retire, to generate such levels of income means that they are likely to need a pension value in the region of £237,000, that’s assuming they retired at 67!
The reality is that 77% of savers don't know how much they'll need in retirement, and only 16% can actually give a figure of what they will need. Generally, we’re all living longer and in better health, meaning it’s crucial that savers make sufficient preparations to safeguard their financial future in later life. Having a plan, which can be adjusted along the way, is key. Savers need to make the right decisions for themselves, both now and in the future."
How do the Courts deal with pensions?
In any matter, the starting point for the Court is to divide the matrimonial assets between you and your ex-partner equally. However, the starting point of an equal distribution is subject to the needs of you, your ex-partner and most importantly, your children. The law puts the needs of any children first when determining what would be a fair outcome.
Specifically, in relation to Pensions, there are three ways in which the Court can deal with them. These are by way of Pension Sharing Orders, Offsetting and Pension Attachments Orders.
There is no one size fits all solution when considering the division of assets and the best course of action when it comes to pensions will depend upon many factors. Careful consideration will need to be given to the circumstances of each case and an agreeable outcome that is fair to all can often be achieved through open and honest discussion and needn't always require a court's intervention.
Do I have to disclose details of my pension?
Yes! Even if you reach an agreement directly with your ex and agree that neither of you will make a claim in respect of the other’s pension, you still must provide details as to the value of any pension you have. This is commonly referred to as providing 'full and frank disclosure'. In a nutshell, it means that you have to be open and honest about all of your financial assets, which includes savings, investments and of course, pensions.
When any financial order is filed with the Court (whether by consent or by court order) you and your ex will have to complete a Statement of Information Form which sets out details of your respective capital and income, including pensions. The purpose of this form is to assist the Judge in considering whether the agreement which you have reached is fair.
There may also be some merit in having a pension expert involved to assess what the pensions are worth.
Top Tip – It's a good idea to obtain the valuation of any pensions you have as soon as possible as sometimes it can take many months for the valuation to be received from your pension provider.
At Thornton Jones Solicitors, we have an expert team of lawyers who will be able to advise you further in relation to your options concerning the financial consequences of your separation including pensions. We can help you reach an agreement that doesn't require the involvement of a Judge and guide you through the entire separation and divorce process.
If you wish to discuss further, then please call us for a free and no obligation chat at any of our four offices.
Call our Wakefield office on 01924 290 029
Call our Garforth office on 0113 246 4423
Call our Ossett office on 01924 586 466
Call our Sherburn in Elmet office on 01977 350 500
Thornton Jones Solicitors are Family Law Solicitors in Wakefield. We have a wealth of experience in helping couples separate and divorce. We are also renowned Family Law Solicitors in Garforth and with offices in Ossett and Sherburn in Elmet we are accessible to all who need us in West Yorkshire.
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