What will happen to my pension when I get divorced?
Your pension should be taken into account in a financial settlement during a divorce/civil partnership dissolution. You can decide to balance the pension against another asset, such as a property (Pension Offsetting), arrange for some of the pension to be paid to your ex-spouse when you receive payment (Pension Attachment) or split the pension into two at the time of the Divorce/civil partnership (Pension Sharing).
It is important that both parties know the value of their pensions (but you need consent to know the other person's pension value - a pension can be the most valuable asset in a financial settlement, so speak to your Solicitor to ensure that you choose the best option for your circumstances.
What is a CETV?
A Cash Equivalent Transfer Value (CETV) is obtained from your pension trustees to assess the value of your pension. It is this figure which is taken into account for the purposes of calculating the assets available for division when considering a financial settlement following the breakdown of a marriage/civil partnership. The CETV of a pension is of particular importance when the pension is of a high value and/or the couple have been married/in a civil partnership for a substantial length of time. On occasion, it is necessary to obtain the advice of a pensions actuary to prepare various calculations in respect of the pension in order to determine the entitlement of the spouse/civil partner making a claim upon a pension.
Pension Sharing
A Pension Sharing order is based on a percentage of the CETV and offers a clean split of the pension assets, and benefits spouses/civil partners with smaller, or no pensions. A proportion of the pension holders pension is transferred into a separate pension fund in the name of the spouse/civil partner, providing them with a pension fund in their own right. This does not apply to judicial separation, and is not affected by death or remarriage. This option has been available since December 2000 when the Welfare Reform and Pensions Act 1999 gave pension splitting powers to the Court to enable clean breaks.
Pension Earmarking
Pension Earmarking, also known as Pension Attachment, can be made when Judicial Separation Proceedings have been issued as well as Divorce Proceedings. It enables death in service benefits to be included and also includes contributions made to the pension fund after the order is made. The order will end if the pension holder dies or the recipient remarries/enters into a civil partnership. Earmarking/Attachment does not provide a clean break and payments to the recipient only start when the pension holder is able to draw their pension.
Pension Offsetting
Pension offsetting balances the pension value against other assets,enabling the pension holder to retain their pension in tact whilst providing the spouse/civil partner with capital in lieu of a claim on the pension. This is only achievable however, if there are sufficient capital assets available.
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