In this three-part series, we’ll cover pensions in divorce. This first blog covers the information you need to provide when securing your long-term financial future. The other blogs cover:
Pensions are very often an important asset. They can sometimes be the most valuable asset that a spouse will own. A pension is primarily an income‑producing asset designed to meet your income needs in retirement, although it also has a capital value.
Even if you have many years before you even think about your retirement, pensions should not be overlooked when considering how to divide your finances on divorce.
Getting this right is important as it is about securing your long-term financial future, including you meeting your income needs in retirement.
Before you can be in any sensible position to negotiate a financial settlement, you must be able to review sufficient financial disclosure about your and your spouse’s pensions.
You might think that you don’t want to make a claim in relation to your spouse’s pensions but, before you can make an informed decision on whether or not that would be fair, you need to know what the true values of your respective pensions are.
There are different types of pensions as follows:
State pensions
This is a pension income paid to you by the Government when you reach state pension age. In this country, State Pension entitlement will depend on your National Insurance Contributions. Obtain the following for yourself and if you feel able to, ask your spouse to obtain a forecast from the following links:
Check your State Pension forecast on the GOV.UK website
Check your National Insurance record on the GOV.UK website
Defined Contribution (DC) pensions
These are sometimes called ‘money purchase pensions’. The current value is determined by the amount of contributions you, and possibly your employer, have made into the scheme and the performance of the investments made by the scheme with those contributions. There is no guarantee of how much income you will get when you retire.
Defined Benefit (DB) pensions
These are sometimes called ‘final salary or career average pensions’. The income you will get when you retire is pre-determined by the scheme rules, rather than depending on investment performance. The value of your pension is based on how long you worked for your employer, your salary (final salary or career average), and the accrual and inflation rates
Public Sector pensions
These are a type of defined benefit pension and apply to professions such as Armed Forces, NHS, Teaching, Civil Service, the Police, Firefighters, Local Government. Each scheme has different benefits.
Other types of pensions
More unusual types of pensions, such as Small Self-administered Schemes, Pension annuities, s.32 transfer plans, exist but these are often set up with professional guidance and are beyond the scope of this blog. The schemes can have complicated provisions.
Getting the right pensions in divorce information
You need to request the “cash equivalent transfer value” for divorce purposes (CETV or CEV) from you pension provider, and ensure that you see the CETV of all of your spouse’s pensions. This figure represents the value of the pension for divorce purposes and is not always the same as the figure shown on your annual statement. It is a good practice to send the following Form to your pension provider asking them to complete it: Form P Pension Inquiry Form.
You and your spouse may have several different pensions with different schemes. Think about all employments you and your spouse have had to ensure you have the CETVs for all the pensions. If you are not sure what pensions you may have, you can search the Pension Tracing Service for both workplace and private pensions.
The Advicenow guide provides support and recommendations if you’re going through a divorce and want to understand more about pensions. When going through a divorce involving pensions, specialist legal advice, and where appropriate, pension expert input, can make all the difference to your financial future.
Here to help
At FJG, our family law team is committed to providing expert, compassionate advice during one of life’s most challenging transitions. If you’re going through separation or divorce, we are more than happy to help you through that process; start on the right foot by seeking legal advice from our Family Law team.
Lisa O’Boyle is a Senior Associate Solicitor in our Family Law Team, specialising in family matters including children, divorce, financial matters arising upon divorce and domestic abuse.
For further advice on any aspect of family law or to discuss meeting with a family lawyer, please contact one of our team in our Colchester, Clacton or Chelmsford offices on 0845 543 5700, or via our online enquiry form.