What ways are pensions dealt with in Financial proceedings?
There are a number of ways that a pension may be dealt with in a financial settlement. Including:
This means that the value of the pension is offset against any other matrimonial assets. This method can be beneficial as it provides a clean break between the parties. However, for some offsetting could mean losing out on a substantial part of the settlement as the retirement benefits may be of more value than the matrimonial assets.
Pension Sharing Order
This means that the Court Orders the pension provider to transfer some of one party’s pension rights to the other. This essentially separates the pension. The benefits are that if you receive part of the other party’s pension through a Pension Sharing Order you will have a pension of your own. Your share can go into a new Pension Scheme if you choose. Also you are unaffected by whether your former partner dies or retires and the Order is not affected by you remarrying. Also a Pension Compensation Fund can be looked at.
With earmarking, the pension benefits still belong to the pension holder, but the Court will order that the benefits that are earmarked will be paid to the other party at the same that that their benefits are paid. Earmarking has limitations and is not widely used.
The disadvantages of Earmarking is that if the person with the pension re-marries the beneficiary of the Order loses their pension benefits and the whole pension is re-allocated to the original pension holder.
Another disadvantage is that the beneficiary of the Order is essentially waiting for the owner of the pension to retire or die before they receive their pension benefits.
Are pensions always divided equally in a Pension Sharing Order?
No, they are not always divided equally. The percentage of the division depends on the amount and value of the other matrimonial assets.
What type of pensions can be covered by a Pension Sharing Order?
A Pension Sharing Order can be made in respect of the following types of pensions:
- An Occupational Pension Scheme
- A Personal Pension Scheme
- A Retirement Annuity Contract
- Annuity or an Insurance Policy brought in respect of pension rights or pension credits.
- A State Pension cannot be subject to a Pension Sharing Order.
What is a CETV?
The Cash Equivalent Benefit (CEB) is when a pension is in payment.
CETV stands for Cash Equivalent Transfer Value. It is generally believed however that a CETV does not always reflect the true value of a pension and that frequently the value will be higher than suggested by the CETV.
Requesting a CETV is normally free providing the pension is not in payment and you have not requested one in the last 12 months.
I have a high value pension, what specialist advice should I seek?
If there is a high value pension then we would recommend you seek advise from an Independent Financial Advisor or Actuary who can then provide expert evidence if needed.
Are there any costs to a Pension Share?
There may be significant costs to transferring a pension imposed by the pension company/trustee.
In 2016 there have been significant changes to pension rules, for example, some pensions can be taken early but would probably be taxed.
Whilst we can give legal advice we can not give financial advice. We recommend you seek expert pension advice from a Financial Advisor or Actuary.