Don’t forget about the pension
Whilst many couples deal with the division of the equity in their house, bank accounts and contents when their relationship breaks down they often forget about the pension, or ignore it because they do not think they are entitled to it. It is important that you do not forget the pension as in many cases this is the second largest asset after your home and in the current climate can actually be the largest.
So what is the law?
If you are going through a separation, divorce or dissolution then you will have a potential claim against all the assets, whether in joint names or in sole names. Assets include pensions. Even if a pension is already in payment a claim can still be made.
What are the options?
At present there are four options available when considering how to deal with the pension.
- Offsetting: This is where the pension remains with the pension member but its value is taken into consideration when dividing the other assets. For example instead of taking any of the pension you may agree that you have more of the equity in the house. This has the advantage of giving you cash now.
- Pension sharing: This allows a share of the pension to be transferred. It depends on the individual pension scheme whether the non member can then transfer the pension to a scheme of their choice or whether they have to keep it in the same scheme. This has the advantage of giving you a pension on your retirement.
- Deferred lump sum: This is where a lump sum is agreed to be paid upon the member retiring and taking their pension. This has the advantage of obtaining a lump sum rather than a pension and can be received much earlier than a pension if your partner is older than you or entitled to take their pension earlier than you.
- Pension attachment: This is where the pension on retirement (either a proportion of the lump sum, income or both) or any death in service grant is paid direct by the pension trustees. This was however introduced prior to pension sharing and is now rarely used.
How is the pension valued?
You will need to contact your pension provider and request a cash equivalent transfer value (CETV). If the pension is already in payment you will need to request a cash equivalent benefit statement (CEB). Generally the value used for negotiation purposes is the value of the pension at the date of the CETV or CEB statement and not therefore the value at date of retirement. In some cases however it is appropriate to consider the value either earlier or later than the CETV or CEB statement.
Don’t miss out on your entitlement and ignore the pension. For an initial consultation to obtain advice on your relationship breakdown and pension entitlement or general family advice please call Amy Chesterfield on 01442 229641