If you\u2019re getting divorced, working out how to divvy up your pension savings may be the last thing you want to think about, especially if retirement is still many years away. But while making decisions about your retirement income may seem less important than deciding who gets the family home, a fair division of pension savings should be a top priority in any divorce settlement. This guide explains why, and how to make decisions surrounding pensions and divorce.<\/p>
Your pension is a financial asset that \u2013 like any other asset \u2013 will need to be taken into consideration in a divorce, or the dissolution of a civil partnership. This applies whether or not you\u2019re already drawing your pension.<\/p>
If both members of the couple have a pension, then pension schemes owned by each of them need to be taken into account.<\/p>
The rules on how much of a pension is taken into account are slightly different in Scotland versus England, Northern Ireland and Wales.<\/p>
Yes. The rules for the state pension are different to the rules for workplace pensions or personal pensions, such as SIPPs.<\/p>
There are 3 main ways in which a pension can be handled in a divorce or the dissolution of a civil partnership.<\/p>
The pension isn\u2019t divided. Instead, it\u2019s offset against other assets. So, one person might keep their pension, while the other retains all other savings and investments, for example.<\/p>
The ownership of a percentage share of one person\u2019s pension is transferred to the other person. Depending on the pension scheme rules, this might be an entirely separate scheme or the same scheme the pension has come from. A pension provider has up to 4 months to enforce a pension sharing order from receiving necessary information.<\/p>
Under these orders (known as \u201cpension earmarking\u201d orders in Scotland), when your pension benefits start to be paid, some of the benefits are redirected to your former partner. In England, Northern Ireland and Wales, this can apply to either pension income or any tax-free lump sum, or both. In Scotland it only applies to the lump sum, and can\u2019t be used to redirect income.<\/p>