A Pension Sharing Order is a formal agreement to divide your pension assets when you divorce. Bradley Kaine, paralegal with our family team, explains more.
A Pension Sharing Order, put very simply, involves one party in the divorce transferring a percentage of their pension to the other.
A Pension Sharing Order can only be made by court order, and due to its complexity, we always recommend that you get legal advice. Once a pension sharing order has been transferred, the pensions are completely separated – there are no links between them at all.
A complicated process
Pensions can be tricky and therefore transferring these from one person to another can be a complex process. A Pension Sharing Order is not the transfer of a fixed sum. Instead, it is a percentage of pension(s) that can be shared from one person to another. I have assisted on many of these Orders, and they are one of the more complicated areas when it comes to family law and finances.
There are a lot of steps to take to make sure everything is taken into consideration, including ages, life expectancy and potential earning capacity. We recommend that you take advice from a financial specialist when dealing with a Pension Sharing Order.
Why are these orders needed?
While Pension Sharing Orders are not required in every divorce case, they should certainly be considered by all couples experiencing a breakup. They are more suitable for some couples than others. For example:
- If one party has high pension values compared to the other.
- A Pension Sharing Order might be suitable during high asset divorce proceedings.
- Or if one party would like to keep an asset, for example the matrimonial home, it might be worth considering offsetting part of their pension and allowing that to be transferred to the other.
It is worth considering
Pensions on the whole tend to be a bit forgotten about by couples when it comes to starting divorce proceedings. Often, they are keen to sort out the more current assets such as the family home leaving other assets such as pensions to be overlooked. In my experience, it is not something that is necessarily at the forefront of clients’ minds when they come to an appointment with us.
Neglecting to consider pensions could leave you disadvantaged later in your life. It is difficult to predict what will come next, so it is vitally important to plan for the future without having tunnel vision on the here and how.
An increasing number
Unfortunately, we are seeing an increasing number of marriage breakdowns, brought on by the pressures couples have faced over the past couple of years. As a result, more couples are seeking legal advice in relation to financial matters and therefore we are dealing with more Pension Sharing Orders, particularly in high asset divorce cases. It is a trend that is predicted to increase further over the next few years.
Get the right advice
Dividing up the assets you share as a married couple is one of the toughest parts of a separation but looking into all areas of your finances is vital.
Pension sharing orders might not apply to you, particularly if you are a younger couple with few assets. But for clients looking to their future or with substantial assets, a Pension Sharing Order can help to make sure both parties have adequate provision in later life.
Our highly experienced team here at Coodes can help. For more information or to speak to a member of our family team, call 0800 328 3282 or contact us via our online form.