Personal Law

Pension Sharing

May 7, 2020

Marriages can end at any point in our lifetimes. As people grow older and change, it can suddenly become clear that they and the person they married have grown apart. Retirement and children leaving home can bring the life of a couple into sharp focus. Moving in different directions, doesn’t mean that marriage as a concept has failed, and we’ve seen a trend of many people in their 50s and 60s remarrying and building lives with new spouses.

We wish anyone remarrying later in life all the best in the future, but again, sometimes things might not work out. At this point here is always the worry that the finances you built in your youth may go to an ex who didn’t participate in or wasn’t a party to the hard work it entailed.  

What happens if your second, later life marriage ends in divorce?

When we consider matrimonial finances and where a settlement should fall we have to consider Section 25 Matrimonial Causes Act 1975. Section 25 provides us with a list of criteria that the Court will consider when making their decision these include:

  1. the income, earning capacity, property and other financial resources which the parties to the marriage have or are likely to have in the foreseeable future;
  2. the financial needs, obligations and responsibilities of each of the parties;
  3. the standard of living enjoyed in the marriage;
  4. the age of the parties and the duration of the marriage;
  5. any physical or mental disability of either of the parties;
  6. the contributions which each of the parties has made to the welfare of the family, including any contribution by looking after the home or caring for the family;
  7. the conduct of each of the parties (the conduct realistically has to be very serious for the Court to take into consideration when making a final order);
  8. the value of any benefits that the parties have which will be lost of change due to the divorce. (this is increasing beginning to mean pension benefits).

There are a number of factors that the Court must consider when considering a final order.

Let’s focus on pensions and how this is dealt with within divorce proceedings. The typical way to deal with pensions is by way of a pension sharing order (PSO). The general view of how to effect a PSO is to provide the spouse with a lower pension fund a share of the larger pension fund, this is calculated by providing the spouse with 50% of the pension that was accrued during the marriage.

For example, if a pension pot has been accruing for 15 years, but the parties have only been married for 10 years, a spouse would only be able to claim 5 years’ worth of pension. Typically, the Court will consider the parties’ cash equivalent transfer values when dealing with pension shares and apportion a percentage over to the other person. This is a very simplified view, things can become more complicated when considering the above factors.

Usually when dealing with pension shares of large pensions it is completely normal, if not advisable for both parties to obtain a report from an actuary or independent financial adviser who can accurately calculate the percentage share that needs to be made.

Pension shares are extremely complicated concepts to deal with. If you are considering a divorce we strongly recommend that you obtain legal advice before making any decisions. The team at Jarmans Solicitors have extensive experience in later life divorce and the ending of second marriages.