How to protect your pension following a divorce

Unless there is a consent or court order in place confirming settlement of all marital assets, either party to a divorce or dissolution of a civil partnership can stake a claim to their former spouse or partners’ pension decades down the line.

Divorce or dissolution of a civil partnership does not, of itself, cut the financial ties between two people. Nor does it matter, in the absence of a legally binding financial agreement or order, whether and to what extent any post-separation pension contributions have been made, or how many years have passed prior to a claim being raised by a former spouse or civil partner.

Accordingly, when considering a financial settlement, it is absolutely crucial that a court-approved agreement or order is put in place at the time, including how any available pension pot is to be divided. In many cases, after the family home, pensions held by either party are likely to represent one of the most valuable marital assets to which careful consideration should be given.

How will a pension be divided?

Once your marital assets have been properly assessed, including any pensions, there are several different ways to split a pension pot following divorce or dissolution of a civil partnership, including what’s known as pension sharing.

Pension sharing allows one party to take a percentage share of their former spouse or partner’s pension pot straightaway. This is called a pension credit that can either be transferred into an existing pension or used to create an entirely new pension. This can be useful where the parties are looking for a clean break.

Alternatively, where the court is asked to decide on how to divide the pension pot, an order may be made for a pension attachment order where part of a pension is paid directly to the other person when the pension holder becomes eligible to draw this.

The court, or the parties, may also elect to offset the value of a pension against other assets, for example, one party keeps their pension in full while their former spouse or civil partner is perhaps awarded a larger share of the family home.

How do I avoid a pension claim?

To avoid problems over pensions arising in the future, you should always endeavour to agree with your ex-spouse or civil partner how any pension(s) and other valuable assets are to be split.

Further, having reached an agreement with your ex, you will then need to instruct your solicitor to draw up a consent order to be approved by the court. This will legalise, and ultimately finalise, your financial settlement, such that neither party can make any further claims in the future.

In this way, your financial ties will be severed for good, and your pension and any other remaining assets, or what you are still entitled to under the terms of any agreement, will be protected. Needless to say, if agreement cannot be reached you should seek expert legal advice, or risk your pension being unprotected in years to come. Needless to say, asking the courts to decide now can often outweigh the risk of leaving the matter to luck.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.