Types of order
You are here
Pensions can be dealt with in one of three ways when you divorce. They are an asset which the Court must consider when calculating your total “pot” of matrimonial assets. Just because the pension is in your name, and your wife has never worked, does not mean that she does not have a claim over it.
If your marriage is short, and you are both quite young, and your pension benefits are similar, it is unlikely that your pensions will be a significant part of your assets. If your marriage is long, and one of you has a public sector final salary scheme that has been paid into for many years whilst the other has no pension provision at all, then by comparison, your pension is going to be a fundamental asset to be divided up.
Pension Sharing Orders
This is increasingly the most common way of dividing up pensions when divorcing. A pension sharing order cannot be made unless there are divorce proceedings. It is important, if your pension is large, to make sure that you get expert advice as to the true value of that pension. The ways in which pensions are calculated can differ, and the types of scheme and benefits differ enormously, and it is important that pensions have been calculated in the same way, taking into account all of the benefits. If a pension sharing order is made, you each hold a part of the pension fund in your own name that was once held by just one of you.
Earmarking
This is a type of order which is not often made because there are lots of disadvantages to it. The Court orders that certain benefits are paid to the other party when the pension comes into payment eg. That the lump sum is paid over, or a part of it, or the annuity. The main disadvantage is that if you are to receive income, it will cease when the person who has the pension dies. It is sometimes used if there is a significant age gap between a husband and wife.
Offsetting
This is still the most favoured by many couples. So for example you each own a house and only one of you has a pension. You decide that you want more of the house and the other person can keep the pension. You “offset” your rights to the pension against the house. Again, it is important to obtain the right advice, to ensure that the offsetting figure is not too high. There is a difference between capital payable and future pension benefits in the way in which they are valued.