DIY Divorce and Pensions

Published on 12 Sep 2023

Frequently, we are approached by a spouse who has already started a divorce application themselves and/or reached an informal agreement with their spouse in relation to the financial arrangements arising out of their divorce/separation.

However, very often important considerations have been overlooked, or just disregarded, such that they have been disadvantaged and/or have not achieved a fair settlement. Pensions are a particularly problematic area and it is not uncommon for the parties’ pensions to have been ignored completely, despite being potentially one of the most valuable assets that they have, or that these have been incorrectly valued and factored into any settlement.

It is a common misunderstanding that pension benefits should be conflated and treated in a similar way to non-pension capital (e.g. the proceeds of sale from any property). This is incorrect and tantamount to comparing apples with pears; generally, pensions should be treated differently to non-pension assets and divided separately.

Whilst it is possible to “offset” the value of pensions against non-pension capital, specialist advice is required to properly value the pension benefits to ensure a fair settlement is achieved. Even where cash equivalent (CE) values have been obtained, expert advice should still be sought to ascertain whether the benefits have been correctly valued. Indeed, where defined benefit schemes are involved, there is a real risk that the benefits may have been undervalued, and the incomes which they will produce will be far greater than defined contribution schemes which seemingly have equivalent CE values.

We would always encourage a party to seek proper legal advice before starting a divorce and prior to any financial settlement. If you would like to discuss such matters, please contact our specialist team.

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