Divorce settlement financial advice must take into account the pension provision of the parties involved.
There is often a disparity between the pension values of each the parties involved in divorce proceedings and, in some cases, one party might not have any pension provision at all.
In the past, the only way to compensate a spouse for such a disparity was by way of ‘off-setting’ – i.e. providing alternative assets (for example, the house) to compensate for the loss of pension security. This ‘off-setting’ is still sometimes an appropriate way to deal with the division of assets.
Since 1st December 2000, however, the Courts have had the power to make orders actually dividing the pension funds between parties. These are called ‘Pension Sharing Orders’.
The Court’s ability to divide pensions is useful in a number of instances and enables the division of a ‘future income stream’ other than by way of maintenance.
PENSION VALUATION ON DIVORCE
In order to divide the pension in a divorce settlement it is necessary to establish the cash equivalent transfer value (CETV) of the pension fund or funds involved. This is the figure the pension provider could transfer to another pension fund should the fund be transferred between providers.
A Pension Sharing Order simply specifies that a certain percentage of the CETV or the pension should be transferred to the other spouse as part of the divorce settlement.
In some cases, it is necessary to work in conjunction with a pension expert to ensure that the pension is properly valued and its provisions properly understood so that the right type of order is made as part of the divorce settlement.
Our Family Law team will advise you as to when a pension expert should be involved and whether a Pension sharing Order is appropriate to your personal circumstances. We can also arrange for the pension valuation to be carried out.
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