Page 29 - Top Cover Issue 18

SUMMER 2023 TOP COVER 29

PENSION SHARING AFTER DIVORCE

Pensions can be a complex area, and never more so than when
a divorce has occurred. George Wilson, Associate Solicitor
at McAlister Family Law specialising in divorce and financial

arrangements involving police, explains some of the difficulties.

Firstly it’s important to define what exactly a ‘pension Complex calculations
sharing order’ is. Just as properties, cash, stocks and shares, As police and NCA Civil Service pensions are complex,
and vehicles can be divided between spouses going through and often high value, they can be confusing. Normally, the
the challenges of a divorce, the Matrimonial Causes Act calculation will seek to achieve either equality of pension
1973 also grants the Family Court of England and Wales income, or equality of pension capital, at a certain age (be
the power to order that pension assets are also shared. that 55, 65, or 67).
There are several ‘pension’ orders available to the Court, but Deciding which to use is something to discuss with a
for the purpose of this article the spotlight will be solely on solicitor. To add to the confusion, the CETV of a pension
Pension Sharing Orders (PSOs) as these are most used – can change over time – even within the months it takes to
other orders are now seen as a bit outdated. finalise the financial aspect of a divorce.
Pension sharing orders are usually a good idea if:
What is a PSO? • one party has a pension, or pensions, with a high value
A PSO is essentially an order – reached either by consent when compared to other assets in the case
between the parties and then sealed by the court, or made in • the parties are close to retirement age and will likely find
the absence of such an agreement within contested financial it difficult to build up similar pension benefits in a short
remedy proceedings – that outlines how one party’s pension time
asset will be shared with the other, ie how Spouse A’s • the parties are older
pension will be shared with Spouse B. Part of one person’s • the receiving party would like to nominate potential
pot is carved out and transferred to the other. beneficiaries of any death benefits if they were to die
There will be a pension credit, and debit, from one spouse before taking retirement benefits.
to the other. There are two ways that this pension credit In the simplest of terms, pension sharing can provide one
(share) can be received: spouse with a pension for later in life. It is part of achieving
• The receiving party can become a member of their ex- a clean break (the end of a financial relationship between
spouse’s scheme and have their own pension (called an divorcing couples) and provides greater flexibility and choice
internal transfer). for those going through the financially and emotionally
• The receiving party can transfer the value of the credit difficult task of divorce. The involvement of the court will
(share) to another pension scheme in their own name ensure that any division of matrimonial assets, including
(called an external transfer). pensions, is fair and reasonable.
Figuring out how much your pension is worth can be a
challenge. Most pension providers will be able to provide Can a historic PSO be varied?
you with an up-to-date Cash Equivalent Transfer Value In short, no. A PSO is intended to provide the parties with
(CETV) of your pension asset. This is the amount the a clean break in terms of their assets and a level of finality
pension provider could transfer to another pension fund to the matter. This would undermine the certainty it is
at the date it is calculated, and is the figure normally used intended to provide.
within family law proceedings to establish how much your Equally, there cannot be a second pension sharing order
pension is worth. made in respect of one pension arrangement. As such, once
Figuring out what proportion of one spouse’s pension a PSO has been implemented by the pension trustees (the
should be shared with the other is even more difficult. pension arrangement) there is, unfortunately, no going back
Although a CETV gives the value of the pension according in most circumstances.
to the scheme’s calculations, it doesn’t always reflect the real It must be noted that not every pension arrangement can
value. The CETV may not take into consideration the value be shared, and pension sharing is a very complex topic. As
of the benefits, or may understate the open market value such, it is essential to gather the correct independent legal
(OMV) of the pension. advice before entering into a pension sharing order.

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