Divorce courts now have the power to make orders dividing pensions between spouses and civil partners. These are called pension sharing orders. You can only divide up a pension by a court order, and not simply by agreement between the two of you.
The facility to divide pensions is extremely useful. There is often a disparity between spouses’ or partners’ pension provision, with the higher earner generally having the higher pension. The ability to share a pension means that it is now possible to divide up a future income stream other than by means of an ongoing maintenance order. In other words, pensions are treated separately to maintenance agreements.
Pensions are valued by means of a cash equivalent transfer value (the CETV). This is the figure which the pension provider would transfer to another pension fund if requested to do so. A pension sharing order provides for a specified percentage of the CETV to be transferred to the other spouse or partner.
We sometimes need to instruct independent actuaries to value pension schemes because the CETV figure does not always reflect the true value. For example, some pensions are index-linked and others are not. An equal division of pension capital does not generally produce the same level of pension for a husband and wife, or civil partners. This is because there is an assumption that women will live longer than men, and the same amount of pension capital will have to last longer.
We work with other experienced professionals on behalf of our clients in these sorts of matters.
Most pension companies will make a charge for implementing pension sharing orders. This is usually between £750 to £1,000 but the cost is generally taken from the pension fund.
Contact Enda Lavery if you would like advice on these pension issues.