PENSIONS AND DIVORCE
The purpose of this document is to help you understand the effect that
divorce proceedings can have on any pension scheme.
divorce proceedings can have on any pension scheme.
- Types of Pension.
- Statutory schemes are provided for those employed by
the state e.g. the Civil Service, Teachers. - Occupational pension schemes: Employees may make
all, some or none of the contributions towards the pension.
Employers may or may not contribute. Benefits can be
based on either the employee’s final salary (final salary
scheme) or the performance of the investment in the fund
(purchase scheme). - Personal pension plans are available to the self-
employed and employed people who were not members
of occupational schemes. They are money purchase
schemes.
- Statutory schemes are provided for those employed by
- Pension Benefits.
- The provision of a pensionThe most common feature of a pension scheme is the
provision of a pension - Spouse’s BenefitsOccupational pension schemes almost, always provide a
spouse’s pensions paid on the death of the contributor.
Personal pensions often do not provide such benefits. - Dependant’s BenefitsThese are common in occupational schemes and provide
pensions for children and often for partners. - Lump sumsMost schemes make provisions for the payment of lump
sums. The provision of the right to exchange or commute
part of the pension for cash is often included.
- The provision of a pensionThe most common feature of a pension scheme is the
- Pensions and divorce.Disclosure of a pension is a requirement in matrimonial
proceedings. The most important information to be provided is
the Cash Equivalent Transfer Value (CETV). This is the basis upon
which the pension is valued by the court.A pension is an asset to be taken into account by the Court
when considering what other matrimonial property should be
divided. Just as there are no hard and fast rules for dividing other
assets or liabilities, there are no hard and fast rules for dividing
pensions or compensating for the loss of pension rights. There is
no automatic right to a share of a scheme member’s pension
on divorce.However, the scheme member’s spouse has the right to make an
application to the Court for a share of the pension but whether
or not that application will be successful will depend on all the
circumstances of the case. When considering an application
for a share of a spouse’s pension the Court must first consider
whether another type of Order (such as periodical payments or a
lump sum) would be more appropriate.
Pension valuations are, at best, a guide and any apparent
certainty is an illusion. - Pension Attachment Order.The Court can make the following Earmarking or Pension
Attachment Orders (but only where the divorce, judicial
separation or nullity Petition has been filed on or after 1st
July 1996)
for: –- An Order that the pension scheme trustees or managers
pay all or part of the member’s pension to his spouse as a
Periodical Payments Order (maintenance). Such an Order
will come into effect only when the scheme member takes
his pension. It comes to an end when the pension scheme
member dies. - An Order that the scheme member commutes his pension
benefits to a lump sum on retirement up to the maximum
allowed by the pension scheme and that the scheme pays
all or part of that benefit to the former spouse. Again, this
only becomes effective if the scheme member is alive at
retirement. - Death in service benefits. Where a pension scheme
provides death in service benefits for a member who dies
before retirement the Court can make an Order, which
requires the pension scheme to pay all or part of the death
benefits to the other party.
- An Order that the pension scheme trustees or managers
- Offsetting.This involves compensating the spouse who is not a member
of a pension scheme by giving that spouse a larger share of the
matrimonial assets. Offsetting is not simple as it can be difficult
to put a value on the pension. - Pension Sharing.Pension sharing is not available for Judicial Separation but only
for Proceedings for Divorce and Nullity and for Petitions filed with
the court after December 2000.It is not possible to make both a Pension Attachment and
Pension Sharing Order in relation to the same pension, in the
same Divorce. Pension Sharing and Pension Attachment will be
calculated on a percentage basis.A Pension Sharing order gives you a share of the pension that
exists at the date of the order.
A Pension Attachment order gives you a share of the pension at
the date of scheme members retirement.
The cash equivalent transfer value
is the basis on which the pension is valued. - Inheritance Act claims.A spouse who is receiving periodical payments at the date of his/
her husband’s death may be entitled to make a claim under the
Inheritance (Provision for Family and Dependants) Act 1975 if the
deceased spouse has not made provision for him/her in his /her
Will. - Insuring your spouse’s life.Before the Decree Absolute is granted each spouse has an
insurable interest in the other. This means that a spouse is entitled
to insure his/her spouse’s life without that spouse’s consent. Such
insurance must be taken out before the Decree Absolute if it is
to be done without the other party’s consent. However, an Order
relating to death in service benefits will have the same effect.