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Pension Sharing Orders on Divorce

When considering the issue of finances upon a Divorce, pensions should always form part of this discussion. By ignoring pensions, this could mean that you are missing out on potential long-term income and future financial security. 

The Court will always consider the value of the pensions divorcing couples have accumulated, including any pensions which may have built up before the marriage, before deciding upon a settlement. In Financial Remedy Proceedings, the Court can make Pension Sharing Orders either with the consent of both parties or, by way of a Court Order. In instances where there has been a short marriage, it might possible to ‘ringfence’ pensions that were accumulated before your marriage began but this is always carefully looked to ensure the couple can still meet their needs which may mean all of the pensions need to be considered. Whilst State Pensions cannot be shared, the Court can still take into account the income that derives from these when considering the division of the other assets, and the parties’ future incomes.

When a Pension Sharing order is made in your favour as part of a financial settlement, you will be entitled to a percentage of one or more of your spouse’s pensions. This share is then often transferred into a pension scheme in your own name. In some cases, you may have the option to join the existing pension fund but this will be dictated by the rules of the scheme. A ‘form known as a Pension Sharing Annex must be sent to the pension provider so that they can implement the Order and divide the pension in accordance with the percentage that has been provided for. A Pension Sharing Order must be implemented by the trustees or managers of a pension scheme and cannot be implemented by the parties themselves. There is no Court fee related to a Pension Sharing Order however, many pension schemes will charge a fee for implementing a share.  This can range for a few hundred pounds to a few thousand pounds and is usually shared equally between the couple.

The use of pension sharing enables parties to reach a ‘clean break’, whilst ensuring both parties receive a fair share of the pensions available. A clean break means neither party can apply to the Court for any further financial orders against the other, and ensures the parties have no continuing financial claim on the other on death.

A Pension Sharing Order takes effect from the later of the date of the Final Order (previously known as the Decree Absolute) or 28 days from the date of the Court approves your Financial Order containing the pension sharing order. If you apply for the Final Order too quickly, your divorce may be finalised before those 28 days have passed and the pension sharing order has come into effect. If you’re the one benefitting from the pension order, you are left at risk as if the pension holder then dies before that period has passed, your pension order cannot be enforced and as you will no longer be married, you will have lost the protection of any widow/widower’s pension rights or benefits. Whilst it can be frustrating for some to have to wait a further 28 days after their Financial Order has been granted, it is vital to ensure your rights are protected.

If you have any questions in relation to Pension Sharing Orders or Financial Remedy Proceedings, please click here or email the family team at family@bpe.co.uk.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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