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Why is it important to take advice on pensions when getting divorced?

When a couple go through divorce proceedings, it is essential that all assets are properly valued including the pension benefits which have accrued during a party’s marriage. As there are a number of different types of pensions, it is important that they are properly valued. Whilst it is usually the Cash Equivalent Transfer Value which is considered when a couple are going through divorce proceedings, this value provided in some instances may need to be clarified including the basis upon which the valuation has been calculated. Some pensions provide better benefits than others and therefore in order to consider all the pension options available when you get divorced, it is essential that you obtain advice not only from an experienced Family Solicitor, but also from an Independent Financial Adviser who is qualified to advise on Pensions. The Independent Financial Adviser will at least be able to provide initial advice on your options and consider with you the pension valuations provided.

Taking Advice from a Pension Actuary

Depending upon the value of the combined pension funds held by both parties in divorce proceedings, it may also be necessary to obtain a report from a Pension Actuary. Whilst this will involve an additional cost, the benefits in obtaining such a report may well outweigh the cost of obtaining it. A Pension Actuary can distinguish between, depending upon the circumstances of the case, the pension benefits which accrued during a marriage and those which might have accrued prior to marriage. Calculations can be provided based on all of the pension benefits and also excluding those pension benefits which accrued prior to marriage, or post-separation. A Pension Actuary can also comment on the valuations provided by the pension companies and set out the percentages and against which pensions any share should be provided.

A Pension Actuary can also provide details of what is known as offsetting whereby the party who has lower pension benefits than the other can receive additional capital assets to compensate them for the loss of pension rights on divorce. A Pension Actuary can also provide details of the terms of a Pension Sharing Order which involves a percentage of one party’s pension being transferred to their former Spouse. Depending upon the rules of the pension company, the pension benefits can either remain where they are and with certain Public Sector schemes, the pension benefits have to be retained within the scheme but under a separate fund, or whether they can be transferred to another pension provider. It is therefore essential that you obtain advice from an Independent Financial Adviser in relation to these issues.

Implementation Period

It is also essential to not apply for the Decree Absolute until 28 days have elapsed from when a Consent Order with a Pension Sharing Annex, which sets out the terms of any Pension Sharing Order has been approved by the Court. This is because the implementation period in respect of the Pension Sharing Order can only start to run from 28 days after the date of the Order or Decree Absolute, whichever is the later. This is to avoid a problem arising if the person with the pension benefits being transferred to them were to die before the implementation period by law can start to run because if the Decree Absolute had been obtained prior to this implementation period commencing, the party receiving the pension benefits would no longer be treated as their legal widow if they were at that time divorced.

Depending upon the type of the pension, there are also more pension freedoms available and more flexibility so far as how pensions can be dealt with if the parties are aged over 55.

It is essential therefore that you obtain the right advice and that pension benefits are properly valued and are not ignore in discussions and negotiations in relation to the financial terms of settlement.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Should you require any further details in relation to financial issues in divorce, please contact Lynne Barton or Nicola Bennetts at Aldridge Brownlee LLP on 01202 294411, Kingsway House, 13 Christchurch Road, Bournemouth, Dorset, BH1 3JY, E-Mail: Lynne.Barton@absolicitors.com or Nicola.Bennetts@absolicitors.com for a fixed fee appointment.

If you would like more information about making a Will, please call one of our trusted and experienced Wills, Trust & Probate Solicitors based at our Bournemouth and Christchurch offices:

Clare Lawson on 01202 527008, E-Mail: Clare.Lawson@absolicitors.com
Moordown Office: 912 Wimborne Road, Bournemouth, Dorset, BH9 2DJ

Lloyd Thomas on 01202 294411, E-Mail: Lloyd.Thomas@absolicitors.com
Lansdowne Office: Kingsway House, 13 Christchurch Road, Bournemouth, Dorset, BH1 3JY

Andrew Lilley on 01425 282150, E-Mail: Andrew.Lilley@absolicitors.com
Highcliffe Office: 277 Lymington Road, Highcliffe, Dorset, BH23 5EB.

Registered Office: 13 Christchurch Road Bournemouth BH1 3JY. Authorised and Regulated by the Solicitors Regulation Authority. Aldridge Brownlee Solicitors LLP is a limited liability partnership registered in England number OC334502

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