Ensuring Fair Division of Retirement Assets in Divorce
Divorce or dissolution of a civil partnership involves the division of various assets, including pensions, which often represent a significant portion of a couple’s wealth. At Waely Law, we provide clear, practical advice on how pensions may be treated during financial settlements and work with clients to ensure that all relevant assets, including retirement benefits, are considered fairly as part of the overall agreement. Where appropriate, we collaborate with financial experts to assist with the division of complex pension assets.
A Pension Sharing Order is a legally binding order issued by the court during divorce or dissolution proceedings, stipulating that a percentage of one spouse’s pension is allocated to the other spouse.
This process allows for a clean financial break, providing each party with their own pension assets to manage independently.
The court determines the percentage of the pension to be shared, known as the pension credit for the receiving spouse and the pension debit for the contributing spouse. The recipient can either transfer this share into their own pension scheme or, in some cases, join the original scheme.
The pension provider typically has up to four months to implement the order once all necessary information is received.
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Clean Break
Allows both parties to have independent pension arrangements post-divorce.
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Financial Security
Ensures that both individuals have retirement provisions, promoting long-term financial stability.
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Flexibility
Each party can manage their pension assets according to their own retirement plans and needs.
Pension Sharing Orders can apply to various types of pensions, including:
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Defined Contribution Schemes
Pensions based on the amount contributed and investment performance.
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Defined Benefit Schemes
Pensions that provide a guaranteed income in retirement, often based on salary and years of service.
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Personal Pension Plans
Individual retirement savings plans.
However, the Basic State Pension is generally excluded from pension sharing but may be considered when assessing overall financial needs.
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Financial Disclosure
Both parties must fully disclose their financial circumstances, including all pension assets.
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Valuation of Pensions
Obtain accurate valuations of all pension schemes, often requiring a Cash Equivalent Transfer Value (CETV).
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Negotiation or Mediation
Discuss and agree upon the division of pension assets, possibly with the assistance of legal professionals or mediators.
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Court Application
Submit the agreed terms to the court for approval, or if no agreement is reached, apply for a court hearing to determine the division.
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Implementation
Once the court issues the Pension Sharing Order, the pension providers implement the division within the specified timeframe.
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A Pension Sharing Order is a legal mechanism used in the UK to divide pension assets between divorcing spouses or dissolving civil partners. It ensures that one party receives a share of the other’s pension benefits, providing financial security post-divorce.
The court issues a Pension Sharing Order specifying the percentage of the pension to be transferred to the ex-spouse or partner. This share, known as a pension credit, can be transferred into the recipient’s own pension scheme or, in some cases, retained within the original scheme.
Most private and occupational pensions, including defined benefit and defined contribution schemes, can be included in a Pension Sharing Order. However, the Basic State Pension is generally excluded from such orders.
At Waely Law, we make the legal process clear, efficient, and stress-free. Here’s what you can expect when you reach out to us:
- MoneyHelper: Pension Sharing – Comprehensive guide on how pension sharing works during divorce or dissolution.
- PensionBee: Pension Sharing Order – Detailed explanation of Pension Sharing Orders and their implications.
