Ask The Legal Expert: What Happens To My Pension If I Get Divorced?

A divorce can be a stressful, emotionally fraught time, and dealing with the financial implications of a divorce might feel overwhelming. At JCP Solicitors, our knowledgeable team stay by your side to keep you as calm as possible and help you make confident, informed decisions.

Jill Bulteel, Director and Head of the Family Team, explains the options for managing your pension options in the event of a divorce.

What Are My Options?

Pensions are usually subject to The Sharing Principle, meaning they are an asset which may be divided upon divorce as part of a financial settlement. This is particularly relevant in the case where one former spouse has taken time out of work to raise children; they may have a reduced pension pot and may be relying on their former spouse’s pension to ‘top up’ their retirement fund.

When arranging your finances during a divorce, there are three main options for how to manage your and your former spouse’s pension. These include:

Pension Sharing Order: this option transfers your former spouse’s pension into a pension scheme in your name. With some Public Sector schemes, this means that the former spouse becomes a ‘Pension Credit’ member. Most of the time, the pension share has to be transferred into a private pension arrangement of your choosing, which requires financial and legal advice. JCP Solicitors can support you with this, and signpost the appropriate financial advisors who can help.

Offsetting: this balances the value of the remaining pension against another asset, usually the house. This means that if the house and your former spouse’s pension hold the same value, you can ‘offset’ your financial arrangements by accepting one or the other. However, this can become complicated and may not be the best choice for your personal circumstances.

Attachment: a percentage of the former spouse’s pension gets set aside for you to claim upon retirement. The benefits are not always shared, and would be lost if you were to remarry. This is a relatively uncommon option.

Should I Consider a Pension Sharing Order?

Pension sharing orders sometimes just give you a percentage of your partner’s pensions. The advantage to this is it will give you an income in retirement. The disadvantage is you will not have the benefit until you retire or reach a certain age when you can draw the pension.

Always seek legal and financial advice, where trusted professionals can guide you to make the best decision for your circumstances.

Why Might Offsetting Be Unsuitable For Me?

Whilst accepting an asset – usually the house – in lieu of a share of your former spouse’s pension may assist you in the short term, it limits your income upon your retirement.

Pensions tend to accrue value and additional benefits until you reach retirement age, and so if you accept the house as an offset, you are giving up any future rights to your former spouse’s pension and its associated benefits.

It is important to seek guidance from trusted financial and legal advisors, who can help you to determine if you can accumulate enough savings to manage your retirement without access to your partner’s pension if you want to offset with the house.

With offsetting you are swapping a future asset (pension) for something you can use now, like house or cash.

For specialist legal advice and guidance, JCP Solicitors can help. Contact Jill Bulteel on 02920 855261 or email jill.bulteel@jcpsolicitors.co.uk