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Pension Sharing on Divorce

Pension Sharing on Divorce

Pensions are considered to be marital assets and must be taken into account in the divorce financial settlement.
A pension can be either:

• Defined benefit pension or a defined contribution pension.

• Defined benefit pension is based on salary and the number of years worked.

• Defined contribution pension is where employer and employee contribute to a pension pot, which is then invested. The value of the pension depends on the contributions made and how the investments have performed.

The pensions are not looked at in isolation – they are one of the assets to be divided between the spouses.

If it is agreed that pensions need to be shared as part of the overall settlement, there are 2 main options:

o Pension sharing order – splitting the pension so that the benefits are subdivided at the time of the divorce; the parties will then have two separate pensions to which they can continue to contribute in the future.

o Offsetting – by adjusting other assets of the marriage to take account of pension sharing.

There is also something call pension ‘Attachment’ – which is an order which allows for all or part of any pension or lump sum arising at retirement to be ‘earmarked’ for the other spouse. This can be complicated and specialist advice would be required.