Divorce Finances - Pensions
It is important when dealing with divorce finances pensions are dealt with. Once Decree Absolute/Final Order is made then the other person will not normally be entitled to any spouse/partner or widow's rights under the pension scheme.
The starting point for assessing a pension is the Cash equivalent transfer value (CETV for short). However this may then be subject to a deduction depending on how long there is to go before the pension can be drawn down. To equalise pension entitlement is rarely a simple calculation given different ages and/or life expectancy.
There are various ways that a pension can be taken into account when a divorce/dissolution settlement is being finalised as follows:
- Offsetting - The value of the pension is offset against other assets with the holder of the pension effectively buying out the other person's interest; or
- Pension splitting/sharing - For petitions issued on or after 1 December 2000 the value of the pension can be divided between the parties in whatever proportion is agreed or assessed. The main pension holder retains their pension fund, but with a reduced value. The remainder is transferred either into an existing or new pension fund for the other person; or
- Pension attachment/earmarking - For petitions issued on or after 1 July 1996 it has been possible divert the benefit of a pension once it is in payment, including a portion of any lump sum draw-down, and provide that all or part of any death benefit is paid out to the other person. The main pension holder is still liable for all of the tax on the pension as though it were theirs.
Pension schemes are entitled to charge for the costs of implementing either pension splitting or earmarking Orders. There is usually a minimum amount, irrespective of the amount being dealt with, and higher charges for more complicated arrangements.
- Further Information
- Financial Issues on Divorce or Dissolution
- Bankruptcy and Divorce or Bankruptcy and Dissolution - The effect of bankruptcy on financial issues
- Capital Gains Tax on Divorce or Dissolution
- Child Maintenance
- Divorce Disclosure - Guide to the duty of disclosure
- Divorce Financial Documents - Guide to using personal documents
- Divorce and Debts
- Child Support
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