If you’ve been married or in a civil partnership, you’ll be asked to gather together all of your financial information. Decisions regarding financial arrangements can only be made once there has been full and frank financial disclosure of all information. This includes information about any pensions you have, including any that have been accrued both before and during the marriage.
If you’re not married or in a civil partnership, there’s no legal entitlement to a share of the other person’s pension.
People often feel overwhelmed thinking about pensions. They can seem complicated and not very relevant to the immediate questions about where everyone will live and how the bills will be paid. However, pensions can be valuable assets. Watch this short film to see why you need to include your pensions when you divide money and property as part of a divorce, and what steps you should take.
We’d suggest that if you have pensions then downloading this Advicenow Guide is a really good place to start. Whilst it’s a lengthy document, it’s written in plain English and we’ll refer to some of the key parts of it below.
Gathering information
The first step is to find out what your pensions are worth. This can take some time and pension providers may take a number of weeks or even months to provide the information which enables you to value your pensions. It’s therefore really important that you request information about your pensions as soon as possible.
You will need to obtain a Cash Equivalent Value for any pensions you have. It’s important when requesting this information that you make it clear it is being requested in the context of divorce. The easiest way to obtain accurate and thorough information about your pension is to ask each pension provider to complete a Form P which you can find here.
Don’t forget to gather information about your State Pension which is also a valuable asset. You can obtain valuations by requesting a statement from the pension service using the BR20 and BR19 forms or using the online checker.
Do you need expert help?
You will have to decide whether you need to obtain some expert help from a Pension on Divorce Expert (often referred to as a PODE) to give you a more accurate picture of the pensions in your case. You can read more about this in the Advicenow Guide from p29 onwards.
There are certain circumstances when the cash equivalent valuations don’t give a true value of your pensions, for example with defined benefit pensions. As a general rule of thumb, if the cash equivalent valuations for all your and your ex’s pensions add up to more than £100,000, you should get expert help. This is particularly important if any are defined benefit pensions.
Obviously there will be costs involved in obtaining this advice and you will need to decide whether the costs of doing this are something you are willing to incur. But it’s important to note that if you don’t have accurate information then you may not reach an agreement that’s fair and won’t be able to revisit it in the future. The costs vary depending on the individual expert, how complicated your situation is and how many questions you ask the expert. As a rough guide, costs generally range from £1,500-£2,500 for an expert report. Usually one expert is asked to provide a report to both of you, so the costs will be shared between you.
You can find out details of PODEs who will be able to assist you by visiting the Resolution website.
Some PODEs will only work for you if you go via a solicitor who will help you to prepare a letter of instruction, explaining what the report needs to cover. It’s really important that you are clear what advice you are asking the PODE for. We’ve included a specimen letter of instruction to a PODE that was produced as part of the Pension Advisory Group’s Guide to the Treatment of Pensions on Divorce report here.
If you don’t get the letter of instruction right it can end up being a very lengthy and costly process to put things right later down the line. We’d therefore suggest speaking to a solicitor to take some independent legal advice before instructing a PODE. A solicitor will also be able to give you recommendations about which PODE to use.
Working out your options
It’s important to understand your options in relation to any pensions you have when you are getting divorced. This includes understanding what you can do with pensions:-
Pension Offsetting
This is where the value of any pension is offset against other assets. An example would be where one person receives a larger share of the family home in return for the other person being able to keep more or all of their pension.
Pension Sharing
Another option is that you could share all, or a percentage of your pension with your ex-partner. An amount can be transferred from one pension into a pension in the other person’s name (into a new or existing pension scheme). This would allow the person receiving the pension to be able to control it and choose when and how to use it.
Pension earmarking/attachment orders
This option means that one partner can pay a portion of their pension income to the other partner when it begins to be paid. This could be either part of the pension income or the lump sum. These orders are rarely made now because there are often huge risks with this type of order and the law has changed to enable pension sharing orders to be made.
It’s also important to understand what the law says and how the courts will deal with pensions on divorce. You can read more about this in the Advicenow Guide from p16 onwards.
Even if you are going to instruct a PODE it can be helpful to have some preliminary discussions about pensions which will help frame the letter of instruction. This is something you can do in mediation.
How can mediation help you make decisions about your pensions?
We will manage a process that takes things step-by-step and which will help you reach an agreement about your pensions and other assets in a way which is cost-effective.
We will assist you with gathering all the information you need regarding your pensions and help you to decide whether you need any additional expert advice from a PODE.
Once you understand your financial circumstances and the legal framework that applies to your case, we will help you to consider and explore the options available to you with a view to you reaching an agreement which is good for you, your family and particularly any children.
Where needed, you will be encouraged to obtain independent legal advice from a solicitor and we will let you know how agreements reached in mediation can be made legally binding, particularly in circumstances where there is to be a pension share.