When a marriage breaks down, one of the most difficult issues to resolve is the division of assets. One often overlooked but significant asset to consider is pensions.
In this blog, we will explore how pensions should be treated on divorce and discuss how recent updates to the pensions guidance have enhanced clarity for divorcing couples.
The Importance of Treating Pensions Fairly
In today’s society, pensions are playing an increasingly significant role in retirement plans. They act as sources of income later in life, and over the course of an individual’s working life, they can grow to become a significant asset – often only second in value to the family home. When a marriage ends, it is crucial to ensure that each party’s financial future is protected and that pensions are treated fairly.
Updated Pensions Guidance
The Pension Advisory Group have just published a second edition of their Guide to the Treatment of Pensions on Divorce, known as PAG2. The original version of the guide, released in 2019, has gone a long way to assisting family lawyers and family courts with information on the approaches available.
The updated guidance makes further clarification on the various pension sharing options available and factors to consider when deciding which option is suitable for a particular couple.
Understanding the Options
There are various options to consider when dividing pensions on divorce:
Pension Sharing: This is the most common approach and allows a spouse to receive a share of the other spouse’s pension. The share of the pension can be calculated using a formula based on the number of years the couple was married and their respective contributions.
Pension Attachment Order: A Pension Attachment Order can be used to provide a spouse with a regular income from their former partner’s pension. The order attaches to the pension but does not transfer ownership.
Pension Offset: Instead of sharing a pension, a pension offset can be used to maintain the status quo and compensate the spouse without a pension. This can be a suitable option for couples who have other assets of equal value.
Dividing pensions on divorce is a complex and sensitive issue that requires careful consideration. The updated pensions guidance aims to provide divorcing couples with greater clarity and understanding. By understanding the options available and seeking professional advice, couples can make informed decisions that protect their financial futures.
Remember, every divorce is unique, and the best approach will depend on the specific circumstances of each case.
For further information on how to approach financial settlement following divorce, please contact Anthony Jones, Director and Head of Family Law at O’Donnell Solicitors.
