| News Article |
 Pension Sharing - the really tricky part of a divorce settlement! - 7 April 2009
When a marriage (or civil partnership) ends in divorce or dissolution the parties need to divide the matrimonial assets.
Although there will be, hopefully, negotiations (by mediation or collaboration) and, possibly, litigation, the assets can usually be valued by obtaining market valuations – for a house this will be the likely sale price; for stocks and shares, the quoted market prices; for savings, the money in the bank.
A valuation for a private family business will be a little more difficult as there may be no “obvious” market price for the shares. However, even in this case a valuation can probably be achieved with an accountant’s help.
Where it can get really tricky is when one (typically the husband) or both parties have accumulated a sizeable pension. Such a fund(s) must be taken into account irrespective of whose name it is in. The Cash Equivalent Transfer Value (CETV) for the pension can often be worth more than the house.
But be warned! A CETV obtained for a divorce may under-estimate the true value of the fund taking into account all the scheme’s benefits. It is important to consider getting a full actuarial value of the pension.
Consider too, taking expert advice about valuing the pension capital you need to provide equality of income. Women generally live longer than men, and need a larger share of the “pension pot” if they are to enjoy the same level of income as their husband until death.
There are then three different ways of allocating the fund between the parties and choosing the right option needs careful consideration:
(i) Offsetting: this enables a party to be compensated for the loss of pension rights – for example, the wife might keep the house, or accept a capital payment, in return for the husband retaining the pension;
(ii) Pension sharing: this is where some of the husband’s pension rights are transferred to the wife, who then gets a pension of her own; and
(iii) Earmarking: this enables part of the husband’s pension to be paid to the wife, though the pension stays in his name.
Each option has advantages and disadvantages: for example, an earmarking order is rarely used as the wife has to wait for the husband to retire to get her income and the pension stops if she remarries or the husband dies.
Securing your pension rights may make the difference between comfort and financial hardship in retirement. You would be very strongly advised to take professional advice.
Helen Meredith, Member, Treasures Solicitors LLP - Tel: 01452 525351 - E-mail hem@treasures-solicitors.co.uk
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