Pensions & Divorce
Pensions can be dealt with by sharing, offsetting or earmarking. Sharing Pension sharing is available for divorce or annulment proceedings filed on or after 1 December 2000. It can also be used on the dissolution of a civil partnership since 5 December 2005. A pension sharing order has the effect of splitting the member's pension pot by a specified percentage. The member's pot is then reduced by that percentage and the ex-spouse/civil partner is awarded a pension credit which can be transferred into his/her own pension arrangement. We will guide you through this process and help you to find a suitable home for any funds to be transferred. Offsetting Offsetting simply means that one partner's pension is traded against other assets from the marriage to give each other a fair value. This can still be used, but problems can occur when the pension is the largest single asset and there aren't any other sufficient assets to trade off against it. Earmarking Earmarking has been an option for splitting up pension rights. It means that a proportion of the pension is specified 'earmarked' to go to the wife, usually upon retirement. This does not allow for a clean break and the control of the pension remains with the member. The member of the scheme could delay retirement or act in a detrimental way and, of course, the pension would end if the member dies unless there was provision for the ex-spouse. This could result in severe financial hardship, particularly if the receiving spouse has not had time to build up a personal pension. Another disadvantage is that pension benefits are treated as income for the member even though part is paid to the ex-spouse. Earmarking is still used today but more often in cases where the pension is already being paid.