Is my spouse entitled to my pension on divorce?

The English court has wide powers to deal with assets on divorce. That includes the ability to order one spouse to transfer a proportion of their pension to the other spouse. This power applies to most UK pensions, including if they are in payment, but does not apply to the new state pension.  It also does not apply to overseas pensions, albeit the trustees of the overseas scheme might be prepared to implement any agreement between the parties to share the pension. 

The amount of the pension to be transferred must be expressed as a percentage of the Cash Equivalent Transfer Value.  Depending on a number of factors, including the value of the parties' pension provision relative to the value of the non-pension assets and the types of pensions involved, it may be necessary to instruct a Pensions On Divorce Expert (referred to commonly as a PODE) to calculate the percentage of the pension to be transferred.

The question of whether a spouse is entitled to a share of the other's pension will depend on the facts of the case at hand.  In a straight forward case where all of the pensions have been built up during the marriage, the starting point will be an equalisation of the overall pension provision.  Equalisation can be achieved either by reference to capital value or by reference to the income the pensions would produce from a specified age.  Which form of equalisation is appropriate will depend on the factual matrix.

To the extent that a party's pension provision was built up before they married or following their separation, it may be possible to exclude the pre-marital and/or post-separation value from the equalisation exercise.  However, such an approach is not likely to be sanctioned by the court if the result would be to leave one party without the ability to meet their reasonable needs in retirement.

It is usually preferable for parties to deal with pension assets completely separately from non-pension assets, as £1 in a pension arrangement cannot be guaranteed to be equivalent to £1 in, say, a bank account.  However, there are cases where the parties' particular circumstances justify the retention by one party of a greater proportion of the pension assets in exchange for the other retaining a greater proportion of the non-pension assets. This practice is known as "off-setting" and must be undertaken with extreme caution, with the assistance of a PODE, to ensure that each party is receiving fair value for what they are giving up.

Pensions on divorce is a complex area. Please contact a member of the Family team if you would like further information.