Relationship Breakdown - Orders Relating to Pensions

A pension is a future asset of a party as well as a  future source of income, and as such will be taken into account in a financial  settlement. It is a particularly complex area of any financial settlement on  divorce or separation, and needs extremely careful consideration before any  final agreement is made. In almost every case it will be wise to instruct a  solicitor to help you.

Orders Relating  to Pensions

There  are two types of Order that a Court can make in relation to pensions. These are  Pension Sharing Orders and Attachment Orders. There cannot be a pension sharing order and an attachment order for the same pension.

Pension Sharing  Orders

This is  where the Court can make an order for one party to share part of their pension  with the other. The order also specifies what percentage of the value is to be  transferred. Once an Order is made, the beneficiary will have an absolute  entitlement to the pension fund and is not affected by any subsequent bankruptcy  of the pension holder. The basic state  pension cannot be the subject of a pension sharing order. Pension sharing  orders are available in respect of occupational, personal, state earnings  related pension schemes and second state pension schemes.

When can this order be made?
A  pension sharing order is only available when a petition for divorce or nullity,  but not judicial separation, has been filed on or after 1st December 2000. If  the petition is earlier than that date, pension sharing will only be available  where Decree Absolute has not been granted and it is possible to rescind the  Decree Nisi with the consent  of the other party to the marriage. After the Decree Nisi is rescinded, it will  be possible to begin new proceedings when pension sharing will be an available  option.

When does the order take effect?
Pension  sharing orders only take effect after the Decree Absolute has been granted.

Can the order be varied?
Once  the Decree Absolute has been granted, the pension sharing order cannot be  varied. Variation of a pension sharing  order can only take place prior to the granting of Decree Absolute.

Attachment  Orders

An  alternative approach is to ask the court to make an attachment order. The  effect of such an order is to require those in charge of the pension to pay  amounts, expressed in percentage terms, to the person named in the order, who  is not the holder of the pension.

Attachment  orders do not have the protection of pension sharing orders and are  particularly vulnerable to claims of bankruptcy, in which case the whole of the  pension fund would vest in the trustee in bankruptcy, even when there is an  attachment order in place. Unlike pension sharing orders, an application can be  made to vary attachment orders at any time.

There  are three kinds of attachment orders:

(1) Attachment for income  purposes
Such an  order provides for periodical payments to one party up to the death of either  party.

(2) Attachment for a capital sum
The  effect of this order is to provide a lump sum from the pension. This lump sum  is paid when the pension is taken, and this is obviously uncertain.

(3) Attachment of death in  service benefits
A  pension scheme will usually specify who should receive the appropriate benefits  of the scheme should the holder die before taking the pension. An attachment of  death in service benefits order can force the holder of the pension to specify  that the other party should receive such benefits.

The  downside to attachment orders is that the person who has the benefit of the  pension can decide when the payments should be made. As such, the spouse may be  kept waiting for a long time before receiving the benefits. Furthermore, if the  spouse remarries, any provision regarding income payments will end. As such,  the mainstream view is that pension sharing is a better option than attachment.

What Factors  Will the Court Take into Account When Directing an Order?

The overriding objective of the Court is to come up with a  solution that is as fair as possible to all parties. The Court will take into  account a number of factors when deciding on the most appropriate Order to  make, these include:

What is best  for the family:  
For instance, where housing provision is the key consideration, it may  be best for the spouse to seek alarger share of the liquid capital  available.

Death benefits payable under the  relevant scheme:
In cases where a spouse or dependant will continue to receive  maintenance for the foreseeable future, it is essential to ensure that  appropriate arrangements have been made in the event of the unforeseen death of  the payer.

The age of the  parties concerned:
Where parties are both young, the Court might conclude that there  is sufficient time for both to make subsequent pension provision for themselves  and therefore refrain from making an order.

The value of  the fund:
A  pension scheme’s Cash Equivalent Transfer Value or CETV  is used by the Court in pension calculations. This is the amount of the fund  needed to provide the pension in the future. However, this does not always  produce an accurate valuation of the benefits payable. As such, it is sometimes  necessary to investigate this in more detail to ensure that a fair award is  made.

The Costs  Involved

Ultimately, both parties should think very carefully about  seeking an order if the amounts involved are very small. Litigation can be expensive, and there is  little value in taking this approach if the pension funds at stake are not  significant.

How Can We  Help?

Divorce is a difficult time for those involved. Our  qualified and experienced family team will seek to advise you throughout the  divorce process, as well as offering you information about alternative  resolution options. We can also help you with the protection and distribution  of jointly owned assets, both property and financial, and with any issues  relating to your children.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.