Before the year 2000, the court had no power to deal directly with pensions.
They have always been relevant when considering a divorce settlement, but before 2000, there was really only one way of dealing with them, which was by an off-setting arrangement. This meant that the spouse without the pension would be compensated by having an additional share of the other assets.
This was far from satisfactory, particularly if there weren’t enough other assets available to compensate the spouse who did not hold the pension. As a result, in 2000, Pension Sharing and Pension Earmarking (Attachment) Orders were introduced.
Pension Sharing and Pension Earmarking are complex. There have been inconsistencies between the courts and judges, making it difficult for lawyers to advise their client on a likely outcome. The need for proper guidance in this area became imperative and, as a result, the Pension Advisory Group has published a guide to the treatment of pensions on divorce.
The key recommendations discussed in the report include:
- The best way to gather information of all the client’s pensions, including state pension and benefits such as death benefits, guarantees and other potentially complicated features;
How to approach valuations for divorce purposes in “needs” based and “sharing” based cases, including timing and source of pension entitlements, apportionment of pensions, cases involving equalisation of income and equalisation of capital approaches and cases involving offsetting;
Evidence where there are large age differences between divorcing parties with income gap issues;
Evidence where there are complications in valuations and treatment of pensions on divorce, where defined benefit pension schemes were involved;
Guidance as to when it is likely that expert advice and expert valuations will be needed;
Tax issues and potential interactions with means tested benefits are covered;
Post-order implementation and underfunding and insolvency issues are also covered.
This a very welcome, comprehensive report which will assist solicitors with advising their clients where pensions form part of the financial pot, to ensure that both parties have appropriate pension provision.
This still remains a complex area and should there be a pension or pensions amongst the valuable marital assets, it is recommended that you seek advice from a member of our Family Team who are specialists in this area.
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