To achieve your fair share of pension rights and a clean break you will need expert legal and financial advice, especially where divorce is taking place between older couples and a considerable pension fund built up over the life of the marriage.
The allocation of pension rights on divorce is a particularly sensitive issue mainly because women are likely to have much smaller pension pots than men. This is usually for two main reasons – women on average earn less than men and they are more likely to have spent time out of the workplace raising children. In the event of a divorce, it is as important to consider the fair split of pension provision as it is the division of any other assets. If one spouse has no pension savings because they have stayed off work to support either house or family, while the other has worked and built a substantial fund, this should be taken into account when determining the settlement.
When pensions are to be shared, you may not actually split the pension fund itself but instead, offset your rights to it against the value of something else – perhaps some investments, business assets or even the marital home. Where young children are involved, for example, the marital home may be a precious asset which will reduce upheaval in the short term. However, the benefits of this need to be weighted against those more formally related to retirement.
If a longer term solution for pension assets is required, there are a number of available options. The first might be to earmark a portion of your ex-spouse’s pension fund, and defer receipt of that benefit until they retire. However, such earmarking leaves one partner dependent on the other, reducing the chances of a clean break. They may also have to wait years before benefiting – and, if your ex-spouse dies before retirement, it is possible you could end up with no formal pension provision at all.
To protect against such eventualities, it is now possible to split a pension at the time of divorce. A dependent ex-spouse gains access to a specific portion of the main breadwinner’s pension fund which then allows them to move their share away and make a much “cleaner” break. Both parties can then move on and take full control over their own share. In addition, if the main pension holder dies or remarries, all pension rights for the ex-partner remain protected.
The allocation of pensions on divorce requires expert legal and financial advice to achieve a fair split for both parties. If you could benefit from talking to our financial advisers on this matter please call 0141 764 0040 in complete confidence. Contact Us.