A pension fund is for many people the most substantial financial investment they will ever make except perhaps for property. Pension sharing and offsetting are the choices in the majority of financial remedy cases.
The factors to note are the size of a pension and the cash equivalent for a final salary scheme or pension in payment; the fund size including money purchase fund or drawdown; age of parties.
There are four main types of pensions including occupational salary related pensions; occupational money purchase schemes; personal pension schemes and state pensions. It is important to establish what type of pension is being considered and also to consider the benefits provided under the scheme upon retirement.
The various ways in which a pension may be dealt with by the court may be as a general resource for offsetting; attachment order or pension sharing.
Pension sharing orders are relatively routine and are the most common way of dividing up pensions in financial remedy cases. A party’s pension may be subject to a pension sharing order that provides for shareable rights; shareable state scheme rights or a percentage may be transferred.
Pension attachment orders (earmarking) are orders for payment of periodical payments and lump sum orders against benefits held by a pension scheme member, providing for a part of the pension benefits to be made to the former spouse by the provider.
Offsetting is not a pension order, it is a way in which the court takes into account pension benefits when dividing up the assets of the parties. A party may retain their pension but the other assets may be divided more in favour of the other party to compensate. Lump sums, periodical payments and property adjustment orders assist in dividing up the rest of the assets when a pension is retained by one or both parties.
Sometimes if matters are relatively complicated it may be helpful seeking out the assistance of an independent financial adviser who has experience in divorce and pensions as their expertise may assist if the pension assets are of a money purchase nature. If substantial final salary benefits are a factor then it may be better to seek out the services of an appropriate actuary.