Resolving matrimonial finances upon divorce.

It has often been the case in resolving matrimonial finances upon divorce that pensions are a major asset available for distribution.  As this is an asset that many contribute towards for most of their working lives and represents future financial security upon retirement it is often an asset which many wish to The Courts have long had powers to take into account pension assets upon divorce, although in recent years there has been a growth of legislation which has meant that the Court has far wider powers in dealing with pension assets.

In dealing with pensions in the context of divorce proceedings the starting point is to obtain a Cash Equivalent Transfer Value, which provides a notional cash in value for a member’s pension fund.  This provides the measure by which the Court values the asset without Court proceedings.

Since the 1996 Pensions Act and the Welfare and Pension Reform Act 1999 a number of novel ways to deal with pension assets have been created.  Historically Courts could only offset a pension against other assets, such as the former matrimonial home, and this is still a tool that can be used.

Earmarking was introduced by the 1996 Act which allowed the Court to earmark a percentage of a member’s pension fund for the future benefit of his/her spouse if there was a significant disparity in pension funds.  Earmarking, however, only allowed payment to a non-member spouse once the pension was in draw down and had the significant disadvantage that the pension benefits were not available until then and would cease upon the member’s death.  Earmarking is still a power available to the Court, but one used in only limited circumstances.

The 1999 Act introduced pension-sharing which allowed the Court to divide pensions and credit a non-member’s scheme with a pension credit, the member of the scheme’s account being debited accordingly.  This has become the most widely used tool of the Family Court and a very effective remedy. 

Pension assets in the context of divorce are no longer an asset which can be ignored and proper legal advice should always be sought when pensions are at issue.  Solicitors are now well versed in the technicality of the division of pensions and client’s ignore this asset at their peril.