In partnership with
Debenhams Ottaway
Undervalued and overlooked, pensions are usually one aspect of divorce that couples can turn a blind eye to, even though they really shouldn’t.
“Unsurprisingly, the family home is what couples often think of first when deciding how to split their assets, and whilst an important consideration, it’s not just present assets that can provide much-needed security,” shares Natalie Lester, partner in the highly successful family and divorce team at Debenhams Ottaway based in St Albans. “Considering your income for the future, specifically in retirement, is very important and must be considered, to ensure you’re not left without.”
Having worked in family law for over 13 years, Natalie is all too aware of the verbal agreements couples can make when keen on pursuing a clean break. “Whilst co-operation between both spouses is essential, making decisions without first being aware of all your options and the consequences can be more harmful than you think, which is why seeking legal advice alongside these discussions is a must.”
Known for her fair, non-confrontational and professional approach, Natalie specialises in assisting a variety of private and high-net-worth clients to seek effective financial remedies in even the most complex of situations.
It’s her top priority to help divorcing couples solve their issues amicably so they can begin to move forward. Below, she starts by helping to break down the often confusing topic that is pensions...
Q: Why are pensions a vital part of divorce discussions?
Though few realise it, pensions are often one of a couple’s most valuable assets. Sometimes they can even be worth more than the matrimonial home. For this reason alone, they can’t be left out of financial negotiations.
It’s prudent for couples to not only consider their current financial situation in lieu of separation but to look further ahead and consider how they can live stably during retirement, considering they’ll no longer have their spouse’s financial support. Pensions are the primary source of income in later life.
There’s a common misconception that only those with an exceptionally large pension need to seek legal advice about them, but it’s just not true. Anyone with a pension can benefit from speaking with an expert, even if it’s just to understand what they have and how this can impact a divorce settlement.
Q: What needs to be considered when sharing a pension during divorce?
First, it’s good to understand what type of pension you have. Whether it’s a company pension, final salary or a public sector one, it’s vital to understand how your pension works. When reaching a fair resolution concerning income, each party’s needs must be assessed together with the specific facts of the case to determine what percentage of pension a spouse may be entitled to. We consult a pension actuary to assist with making accurate calculations and ensure the split of the pensions is fair. Tax consequences and any potential health concerns will also be taken into account, as will the length of the marriage.
Q: What are the pension settlement options?
We inform clients of the different ways a court can handle pensions during a divorce. The most common option is a pension sharing order, which is an instruction given to the pension scheme administrator to transfer a specified percentage of a spouse’s pension to the other spouse.
Offsetting is another resolution strategy, where an agreement can be reached to trade one asset for another. For example, one party may offset the right to a pension, swapping it for a greater share of the family home. This type of agreement can be more complicated than it appears, as the type of asset needs to be considered and values weighed to ensure it’s a fair exchange. This is where seeking legal help is invaluable.
Another option is to take a pension attachment order or earmarking. This means payments will go directly from one spouse’s pension scheme into the other party’s bank account. However, this can only happen once their spouse is retired and if the scheme member dies before retiring, or if the ex-partner marries or forms a civil partnership, any earmarking/attachment order (other than for lump sum death benefits) usually falls away. It’s these limitations that make it a rarely explored option – I’ve not handled a case like that in 10 years.
Q: Why is it important to get legal advice?
Simply put, for peace of mind. It’s the best way to avoid tricky conversations from becoming controversial and to ensure each spouse leaves the marriage with the respective finances they’re entitled to. When moving through divorce, the process alone can be confusing and emotionally overwhelming, making it hard to reach clear and objective decisions.
Hearing the advice of a legal adviser can make matters easier to manage. It’s never wise to rush into a decision. Analysing the figures first will empower you to make the best judgement for you and your family.
Often people don’t realise that a partner may be entitled to a percentage of the other’s pension, by being informed, it will ensure no stones are left unturned. It’s the most effective way to reach that new chapter both partners are eager for.
Q: Why choose Debenhams Ottaway’s family and divorce team?
We adopt a collaborative approach, aiding communication between spouses and providing an adept legal support network to remind our clients they are not alone throughout any of this process. Irrelevant of where you’re at in your divorce, we can point you in the right direction, whether it’s for financial or emotional clarity, to make every step as easy as it can be for all involved.
During a divorce, especially when considering complex financial affairs, it's hard to see the wood for the trees. With our bespoke, expert professional advice and friendly approach, we can help clear away the fog, allowing you to see a way forward, and a bright future waiting for you just on the horizon.
For more information about sharing pensions in a divorce, visit debenhamsottaway.co.uk.
Contact Natalie Lester at nl@debenhamsottaway.co.uk or call 01727 735612.
