PENSIONS AND DIVORCE

The purpose of this document is to help you understand the effect that
divorce proceedings can have on any pension scheme.

  1. Types of Pension.
    1. Statutory schemes are provided for those employed by
      the state e.g. the Civil Service, Teachers.
    2. Occupational pension schemes: Employees may make
      all, some or none of the contributions towards the pension.
      Employers may or may not contribute. Benefits can be
      based on either the employee’s final salary (final salary
      scheme) or the performance of the investment in the fund
      (purchase scheme).
    3. Personal pension plans are available to the self-
      employed and employed people who were not members
      of occupational schemes. They are money purchase
      schemes.
  2. Pension Benefits.
    1. The provision of a pensionThe most common feature of a pension scheme is the
      provision of a pension
    2. Spouse’s BenefitsOccupational pension schemes almost, always provide a
      spouse’s pensions paid on the death of the contributor.
      Personal pensions often do not provide such benefits.
    3. Dependant’s BenefitsThese are common in occupational schemes and provide
      pensions for children and often for partners.
    4. Lump sumsMost schemes make provisions for the payment of lump
      sums. The provision of the right to exchange or commute
      part of the pension for cash is often included.
  3. Pensions and divorce.Disclosure of a pension is a requirement in matrimonial
    proceedings. The most important information to be provided is
    the Cash Equivalent Transfer Value (CETV). This is the basis upon
    which the pension is valued by the court.A pension is an asset to be taken into account by the Court
    when considering what other matrimonial property should be
    divided. Just as there are no hard and fast rules for dividing other
    assets or liabilities, there are no hard and fast rules for dividing
    pensions or compensating for the loss of pension rights. There is
    no automatic right to a share of a scheme member’s pension
    on divorce.
    However, the scheme member’s spouse has the right to make an
    application to the Court for a share of the pension but whether
    or not that application will be successful will depend on all the
    circumstances of the case. When considering an application
    for a share of a spouse’s pension the Court must first consider
    whether another type of Order (such as periodical payments or a
    lump sum) would be more appropriate.

    Pension valuations are, at best, a guide and any apparent
    certainty is an illusion.

  4. Pension Attachment Order.The Court can make the following Earmarking or Pension
    Attachment Orders (but only where the divorce, judicial
    separation or nullity Petition has been filed on or after 1st
    July 1996)
    for:
    -

    • An Order that the pension scheme trustees or managers
      pay all or part of the member’s pension to his spouse as a
      Periodical Payments Order (maintenance). Such an Order
      will come into effect only when the scheme member takes
      his pension. It comes to an end when the pension scheme
      member dies.
    • An Order that the scheme member commutes his pension
      benefits to a lump sum on retirement up to the maximum
      allowed by the pension scheme and that the scheme pays
      all or part of that benefit to the former spouse. Again, this
      only becomes effective if the scheme member is alive at
      retirement.
    • Death in service benefits. Where a pension scheme
      provides death in service benefits for a member who dies
      before retirement the Court can make an Order, which
      requires the pension scheme to pay all or part of the death
      benefits to the other party.
  5. Offsetting.This involves compensating the spouse who is not a member
    of a pension scheme by giving that spouse a larger share of the
    matrimonial assets. Offsetting is not simple as it can be difficult
    to put a value on the pension.
  6. Pension Sharing.Pension sharing is not available for Judicial Separation but only
    for Proceedings for Divorce and Nullity and for Petitions filed with
    the court after December 2000.It is not possible to make both a Pension Attachment and
    Pension Sharing Order in relation to the same pension, in the
    same Divorce. Pension Sharing and Pension Attachment will be
    calculated on a percentage basis.A Pension Sharing order gives you a share of the pension that
    exists at the date of the order.

    A Pension Attachment order gives you a share of the pension at
    the date of scheme members retirement.

    The cash equivalent transfer value
    is the basis on which the pension is valued.

  7. Inheritance Act claims.A spouse who is receiving periodical payments at the date of his/
    her husband’s death may be entitled to make a claim under the
    Inheritance (Provision for Family and Dependants) Act 1975 if the
    deceased spouse has not made provision for him/her in his /her
    Will.
  8. Insuring your spouse’s life.Before the Decree Absolute is granted each spouse has an
    insurable interest in the other. This means that a spouse is entitled
    to insure his/her spouse’s life without that spouse’s consent. Such
    insurance must be taken out before the Decree Absolute if it is
    to be done without the other party’s consent. However, an Order
    relating to death in service benefits will have the same effect.
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