Why Pensions Get Personal In Divorce: A Chat with Stuart Parker

A Chat with Stuart Parker on Pension Sharing and Fairness

Divorce can be a complicated and emotionally charged process, and when it comes to dividing assets, things can get even more challenging. Among the many elements that need to be addressed, pensions are often one of the most complex and easily overlooked. So, why do pensions get so personal during a divorce, and how can individuals navigate pension sharing in a way that’s fair to both spouses?

To answer these questions, we spoke with Stuart Parker, a highly experienced Divorce Finance Solicitor. Stuart explains the importance of pensions in divorce settlements, how pension sharing works and what it means to ensure fairness in this complicated area.

Why Pensions Matter in Divorce

Pensions are often one of the most significant assets couples hold, sometimes even more so than property or savings. While many people focus on the immediately realisable financial assets during divorce, pensions, where available, are vital deferred benefits always requiring careful consideration.

· The role of pensions in divorce: pension provision is often the most substantial matrimonial asset, so it’s crucial to address such benefits appropriately when negotiating a divorce settlement. Pensions are surprisingly often overlooked, but do this at your peril as their value needs to be factored in to achieve an equitable distribution of assets.

· Pensions and fairness: When dealing with pensions in divorce, fairness doesn’t always mean a 50/50 split, the key is understanding both parties’ future needs. For example, one spouse may have a much larger pension pot than the other or one spouse may require a larger share of the available pensions to ensure financial security once they retire.

What is Pension Sharing?

Pension sharing on divorce, when implemented, transfers in percentage terms a proportion of one spouse’s pension to the other spouse’s pension to ensure equality of benefits in retirement where is it fair to do so.

How Pension Sharing Works

This is done through a pension sharing order implemented by the pension schemes. It’s important to understand the rules around this because the amount of the percentage share can depend upon factors such as the type of pension schemes (i.e.

defined benefit or defined contribution), the length of the marriage, and both parties’ financial circumstances.

What’s Fair in Pension Sharing?

Fairness in pension sharing isn’t just about splitting the pot equally; it’s about looking at the bigger picture. Each party’s future needs should be taken into account, especially if one spouse has given up career opportunities or contributed less to the pension due to childcare or other responsibilities.

Consider All Assets Not Just The Pensions.

While pensions often form a large and significant part of the matrimonial ‘pot’ they should always be considered alongside realisable assets like property, savings and investments. A holistic approach is the most effective way to ensure a fair division.

Consulting Financial Experts

Where pension benefits are substantial and more complex such as in the case of defined benefit schemes/final salary pensions, it is appropriate and necessary for the instruction of a specialist actuary known as a pensions on divorce expert who will value the pension schemes and provide calculations to achieve such outcomes as a pension share to achieve equality of benefits in retirement or the offsetting of deferred pension benefits as against the interest in realisable assets such as the family home.

Spouses who have pension sharing orders made in their favour may require specialist independent financial advice to set up a suitable pension scheme to ‘receive’ the pension credit from the other spouse’s scheme.

Dividing pensions in a divorce can be one of the most complicated aspects of the process, but with the right approach, it doesn’t have to be overwhelming. As Stuart Parker explained, the key to a fair pension settlement is understanding the value of the pensions involved, considering the future needs of both parties, and seeking professional advice from financial experts.

Pensions are personal—and ensuring fairness when dividing them in divorce can pave the way for a smoother transition into the next chapter of life. Call any Pepperells office and take the first step to important legal advice today.