Can we share our Pensions?
You can share the additional state pension (previously called SERPS), your private personal pension, and your occupational pension, but not your basic state pension although we may be able to do something with this (more later)
What do we need to do?
The above pensions can only be shared with a Pension Sharing Order after Decree Absolute in a divorce case. You will need to see a solicitor about this.
Will an order for 50% of the pension share it between us equally?
Probably not. You will need to check this out before the order is made, as it cannot be varied. You may need to see both an Actuary to value the pension, and an Independent Financial Adviser (IFA) to help you set up a pension for yourself, as most schemes do not allow you to become a member within your spouse’s pension scheme.
Which schemes allow me to become a member in them?
These are usually state funded pension schemes e.g. Armed Forces Pension Scheme, Police, Fire Service, Local Government, County Council, Health Service, Royal Mail.
What about other schemes?
Each scheme decides if you can be a member, or you have to transfer your benefits out of the scheme into a personal pension for you. Most require this, and you will need independent financial advice about setting up a pension for yourself. Setting up a scheme will involve expenses, administration fees in setting it up and administering it, and the IFA will require some payment usually unless they are paid on commission by the pension provider. Their fees, exceptionally, can be up to 5% of the pension share you receive.
Why should I bother with a pension?
You may well not be able to fund the payments into a pension you will need to make to give you a reasonable income in retirement. The publicly funded pension schemes mentioned above provide excellent pensions that you will struggle to match, if this is possible at all. They could be the most valuable matrimonial asset, and must never be ignored.
Can the court make an order about my pension?
Yes. There are two types of order it can make, but it can only make one type of order against each individual pension
A. Earmarking Order. This order gives you a lump sum:
1. On retirement, and or
2. If they were to die before retirement whilst still in service (this is called a “death in service payment”). This is useful if the pension is small but there is a large lump sum payment if they die whilst still employed. This lump sum can be as much as 4 times their annual salary at death
3. It can also give you a monthly maintenance payment until they die, or you remarry whichever is earlier, but, this will not usually be payable until their pension is payable, and sometimes not until you are at state retirement age regardless of when they receive their pension. Also the maintenance stops under some schemes if you cohabit as husband and wife even if you do not remarry.
This type of order is useful in limited circumstances. Perhaps with a short marriage and a young couple where a large lump sum is imminently payable under a pension eg Armed Forces Pension Scheme, or as indicated above.
B. Pension Sharing Order
This will give you your own pension. This means you can remarry, and they can die, and you will still have your pension.
Basic State Pension – Free Tip
You may be able to increase your basic state pension for free. If you have lower national insurance contributions than your spouse on divorce you can opt to substitute their national insurance record for your own for the period of your marriage, and boost your own pension. This is lost if you remarry.
I recommend the following website for detailed information on state pensions http://www.thepensionservice.gov.uk/ including a state age calculator, i.e. at what age you can retire, and a request for an up-to-date basic state pension valuation calculation.