Like all marital assets, unless you get a financial separation order from a court, your partner can make a claim on a pension at any time. It is advised that you seek a financial settlement while divorcing. This means your financial assets, including your pension, will not be a claimable issue in the future.
Can I protect my pension against my ex-partner?
Before you reach a financial agreement, your ex-partner has a claim on your marital assets. Most financial agreements will take place during the divorce process, and your pension will be included within these finances. Like other marital assets, the court will decide how to divide your pension by looking at several factors. These are laid out in the Matrimonial Causes Act 1973. They will consider:
- Income, earning capacity, financial resources and property of each spouse.
- Financial requirements and needs of each spouse.
- Spousal contribution: what each spouse has given to benefit the welfare of the family.
- The value of the benefit to each spouse that one spouse would lose because of the divorce.
- The standard of living the family was used to before the marital breakdown.
- The mental and physical capacity of each spouse.
- The ages of each partner.
- The conduct of each spouse, if it was deemed serious enough that it would be unfair to disregard it in the eyes of the court.
What about the parts of my pension that I accrued before my marriage?
Different rules apply in Scotland, Wales, and Northern Ireland than they do in England. In Scotland, only the money that went into the pension during your marriage is considered. You will have to work out the value of the money in your pension accrued during your married life.
For the rest of the UK, your entire pension, before and after, will be taken into consideration by the court. The courts see marriage as a theoretical lifetime commitment. Therefore, married couples should expect to share their assets, including pensions, for life. Married couples will also change their roles in a marriage. This means one partner may have accrued value to their pension, while the other did not.
However, in some circumstances, this rule can change. This is done on a case-by-case basis. For example, one couple may have only been married for two years, but one partner may have built up a valuable pension over thirty years. The court would likely only consider the pension money accrued during the marriage as part of the settlement.
Ways to divide pensions
There are four main court orders used by the courts, each following a distinct process.
1) Pension Sharing
This is one of the most popular ways of dividing a pension, as it provides a clean break for both partners. One party can be given a percentage share of their ex-spouse’s or ex-civil partner’s pension pot or a lump sum from it. This money is then legally that party’s money. It can be moved out of the original partner’s pension scheme and into a new one. It can then be accessed by them when they retire, even if their ex-spouse has not yet reached retirement age. The percentage share a partner receives through pension sharing also continues even if they remarry.
If you decide to divide your pension through pension sharing, the court will issue a pension sharing order. This states how much your ex-spouse is entitled to receive. The court ultimately decides how much of your pension will go to your ex-partner.
2) Pension Offsetting
Offsetting is another route that also allows a clean break. The court can decide that one partner keeps their pension, while the other partner receives assets equivalent to what the pension is worth. Although it can be very difficult to calculate exactly how much a pension is worth in relation to other assets, it can be worth it to achieve a clean break from your spouse.
This order can be given for several reasons. For example:
If a couple is looking to divide assets 50/50, this may mean selling their house. However, if one partner has a significantly larger pension than the other, they could receive less of the sale proceeds from the house and keep more, or all, of their pension.
This does mean that the non-pension-owning party receives a greater share of marital assets up front. But they may not have the same security later unless spousal maintenance is also being given, even though it does mean that a clean break is achieved.
3) Pensions Attachment
This order, called Pension Earmarking in Scotland, is rarely issued. An attachment order means that when the pension finally pays out, a portion of it is reserved for the partner. This proportion is ring-fenced, but you will have to wait for your ex-partner to retire before it is paid out to you, even if you are already retired.
Importantly, a pensions attachment order takes into account the pension benefits earned after a couple has divorced. Furthermore, because no clean break happens, an attachment order acts as a maintenance order.
4) Consent Order
You and your partner can also come to a financial agreement outside of court. This does not have to adhere to any conditions of the orders above. However, you will still have to submit a consent order to the court, setting out your financial separation plan. Regardless of your reasons for seeking an alternative pension arrangement, if you agree on something outside of court, the court will still need to approve it. This is to avoid any financial claims against you or your pension or general finances in the future.
What about state pensions?
Your basic State Pension cannot be shared if your marriage or civil partnership ends. You will receive it all. This is the same with the post-2016 New State Pension. However, you may be able to use the National Insurance contribution record of your ex-partner to increase your basic State Pension. This will not take away from your ex-partner’s basic State Pension either.
Your additional State Pension, which is the money you receive on top of the basic State Pension, can be viewed as a marital financial asset by the court. This also includes the State Pension top-up.
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