The treatment of pensions and divorce
After two years of intensive research the Pension Advisory Group has published an essential guide clarifying the legal treatment of pensions on divorce.
Pensions are often the single largest asset after the family home for divorcing couples, yet a lack of understanding and clarity across England and Wales has led to confusion as to how to deal with them.
The report sets out best practice as to how to deal with the following situations:-
- Gathering information – to include information on all client’s pensions, including state pensions, death benefits, and guarantees;
- How to approach valuations in needs-based and sharing- based cases;
- Large age differences between divorcing couples with ‘income gap’ issues; and
- Tax issues and potential interactions with means-tested benefits.
The purpose of the guide is to address the wide variation of financial settlements nationally which stems from a lack of understanding of how professionals should deal with the valuation, sharing or offsetting of pension fund assets. The discomfort with understanding pensions may explain in part why offsetting remains the most commonly adopted remedy. In applying the best practice it is important to identify cases which are needs-based as opposed to sharing-based. In needs-based cases the timing and source of the accrual of pension entitlement is unlikely to be relevant.
The recommendations made throughout the guide hope to achieve a fair and consistent approach when dealing with pensions in divorce.
The President of the Family Division, Sir Andrew McFarlane, said of the guide "I am extremely grateful to the Pension Advisory Group who have worked hard to produce guidance which de-mystifies this area and establishes clear ground rules for the proper approach to be taken in every case."
The full guide for dealing with pensions can be found here:-