We look at some practical tips specific to pension sharing, that can be overlooked when dealing with a financial settlement on divorce.
Pensions are often one of our most valuable assets, so it's important to take care when agreeing to share your pension entitlements on divorce.
Pensions are unique to other assets that can be divided on divorce, which is why we have detailed legislation governing the court's powers to share pension entitlements. The legislation is complemented by decades of case law as well as detailed guidance in the form of the Pensions Advisory Group's 2019 report into the treatment of pensions on divorce. At 160 pages, the PAG report is a stark reminder that pensions are not a straightforward topic.
In this article we look at some practical tips specific to pension sharing, that can be overlooked when dealing with a financial settlement on divorce. These tips are no substitute for detailed advice, however, and you should always consult a specialist family lawyer before agreeing to share your pension entitlements.
Our top tips are:
- Undertake a comprehensive gathering of information at the outset, as it can take a long time to receive information back from some pension schemes. Use Form P to obtain details in relation to any pension scheme of which someone is a member. Care should be taken to ensure that aspects of pension entitlements which may not be immediately obvious are identified, for example death benefits, guaranteed annuities and various other potentially complicating features.
- Do not overlook state pension entitlements, including state pension, additional state pension, and the CE valuation of additional state pension or protected payment. Details of your state pension entitlements can be obtained by completing an online request of the DWP in Forms BR19 and BR20 - remember to request that the other party does the same.
- It is possible to search for lost pensions if you are not sure what pensions you may hold.
- If commissioning a pension report, ensure that your instructions to the Pension on Divorce Expert ('PODE') are as detailed as possible. In sharing cases, where apportionment may be appropriate, give the PODE clear instructions on whether the calculation is to be based on the deferred pension method, the CE, or a straight line.
- You should also ensure the PODE is made aware of any serious health conditions. Substantially impaired life expectancy should be reflected in a PODE's calculations, but minor health conditions or those amenable to change should not normally be so.
- Take special care when completing the Pension Sharing Annex, particularly with scheme names and remember when completing Form D81 that the Regulation 410 information is required. Send a draft Annex to the pension provider in advance for approval in principle.
- The Pension Sharing Order ('PSO') must provide for sharing of a percentage of the pension, not a fixed amount, and you will need to agree on who will pay any charges arising from the transfer.
- A PSO only comes into effect on the later of the granting of a Final Order of divorce or 28 days from the date of the PSO. Consider carefully whether to delay applying for a Final Order (formerly known as Decree Absolute) until 28 days from the date of the PSO. If a Final Order is granted beforehand, a party may lose out in pension terms if their spouse dies after the Final Order has been granted and before the PSO can take effect.
- However, note that a PSO will be implemented by the pension provider after that date. They have a four month window to do so.
- PSOs are not available on variation applications that relate to divorce petitions issued before 1 December 2000. In addition, as a general rule, a PSO cannot be made twice against the same pension from the same marriage. However, on a capitalisation application, a PSO might arguably be made against the same pension from the same marriage which has previously been subject to a PSO.
Pensions are a complex area and you should always consult a specialist family lawyer before entering into an agreement to share part of your pension.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.