Pension and Divorce – The Court and Pension Sharing

What are the courts able to do?

Since December 2000 couples that are divorcing are able to achieve a financial ‘clean break ‘ of the pension rights they have built up. This split is named ‘pension sharing’. It permits an immediate splitting of your pension by transferring part of your pension to the pension plan of your previous civil partner or spouse.

Civil partnerships only became law since 5th December 2005 under the Civil Partnership Act 2004. The act allows same-sex couples to enter into a legally recognized relationship with rights and responsibilities very similar to marriage.

Since 5th December 2005, civil partners have had the right to equal treatment with married people in the areas of tax, employment benefits, most state and occupational pensions benefits, life insurance, access to fatal accidents compensation, recognition for immigration and nationality purposes and income-related benefits.

How does pension sharing work?

When a married couple divorce or a civil partnership is dissolved, the court makes a Pension Sharing Order (PSO) which requires the pension rights of the spouse or civil partner to be split between each party. There’s no requirement to split equally and the proportions will rely on the circumstances surrounding each case. Your solicitor will be able to advise you on this.

A PSO creates a Pension Credit for your previous civil partner or spouse and an equivalent pension debit for you. Remember, in England, Wales and Northern Ireland, all pension rights built up to the date of divorce may be shared. In Scotland, only benefits built up during marriage can be shared.

In most situations, it is likely that the CETV quotation given when you ask for an estimate will be different from the amount that is eventually used to work out the amount of your pension to be awarded to your previous spouse/civil partner. There can be a significant difference. This may have a impact on your pension once the procedure of divorce is completed. Your pension may be higher or lower than the figures used at the beginning of the process. Again, your solicitor will advise you on this.

As a result, in English, Welsh and Northern Ireland courts, a PSO has to be shown as a percentage of your pension.

In Scotland, the PSO is generally expressed as an amount, but it could also be expressed as a percentage. Whether a Scottish PSO is expressed as an amount or as a percentage can have an effect on your pension after the divorce.

Information thanks to Adviser Hub. If you would like to know more about the subject of ‘ divorce and pension‘ or need help with your pension valuation it is sensible to seek advice from a qualified pensions adviser.

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