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A pet, a pet! My pension for a pet!

What happens to a couple's pensions in a divorce?

Recent research has produced some interesting statistics regarding the attitude of people to division of pensions in divorce proceedings. It seems that 7 out of 10 couples will not even consider pensions in a financial settlement and whilst people are prepared to fight for a share of jointly owned property and savings, only 1 in 10 wants a fair share of pensions. Worryingly, almost 50% of those questioned had no idea what happens to pensions after divorce, with others thinking that people automatically keep their own pensions or that they would be split equally regardless. Even more worryingly it seems that a larger number of people would be concerned more by the loss of a family pet than the loss of a fair share of the pension pot.

It is likely that the pension fund of an average couple will be worth several times the present average salary of a worker in the United Kingdom and therefore should not be ignored. It is important that people give consideration to the provision of funding for their retirement and the survey shows that, particularly for divorced women, this is not the case at the present time. It makes the need for consideration of the correct way to deal with pensions at the time of divorce more important than parties appear to realise.

Pensions are assets like any other asset and therefore can be divided between the parties following the breakdown of the marriage. The court has powers to make Pension Attachment Orders, Pension Sharing Orders or to offset the value of the pension against the value of other assets, i.e. with one party perhaps keeping the pension and the other party getting a larger share of other assets in lieu.

Pension Attachment Orders are relatively uncommon as they provide for division of the actual sum paid out once the pension is in payment and will terminate on the death of the pensioner. A Pension Sharing Order provides for the division of the pension pot of the parties between them in whatever proportion is considered fair given the particular circumstances of the parties.

This may mean obtaining a capital value for the pension fund of each party and then dividing those values so that a transfer of some or all of one party’s funds to the other may result. However, caution is needed because different types of schemes may mean that the capital value figures are not like for like.

Historically, certain schemes for particular types of employment (for example police, firefighters, military personnel) have had particularly significant benefits for members which make the value of those funds significantly greater than may appear from a basic valuation figure.

There needs to be careful consideration of these and failure to do so could prove to be expensive.

Alternatively, it is possible to look to share the pension funds based on securing an equal division of the benefits/income available on reaching retirement age. This will generally involve obtaining a report from a pension expert as to the appropriate values as factors such as age, sex, health will affect the likely outcome. A division of funds may be necessary even where the fund values are, on the face of it, relatively similar.

The value of pension funds can form a major part of the assets of a separating couple and ignoring them may have a significant financial impact on one or other party. Certainly it is likely to far exceed the value of a family pet (in financial, if not emotional, terms). It is therefore important that divorcing couples should not ignore the value of any pensions which either may have and they should seek proper advice on the way in which to deal with these funds in their financial settlement.

This article was written by Christopher Goodwin

Please note the contents contained in this article are for general guidance only. Legal advice should be sought before taking action in relation to specific matters.

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