01329 822 333
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There are three main ways of approaching the redistribution of pensions on separation following divorce or dissolution of a civil partnership, namely:
- Offsetting
- Pension sharing
- Pension attachment (formerly known as earmarking)
Offsetting
This involves the use of a payment or transfer of property to compensate the parties for the loss of pension rights.
Offsetting will only be a solution where there are sufficient non-pension resources available.
Pension Sharing
This allows the court to share a pension at the time of a divorce so that the transferee either becomes a member of the transferor’s scheme in their own right (internal transfer) or, alternatively, takes a transfer of a designated amount into their own pension scheme (external transfer).
The order refers to an annex (Form P1), which expresses the pension share as a percentage rather than as a capital amount.
Generally speaking, orders against public sector pensions are made by way of internal transfers, whereas those against private sector pensions are external transfers.
Pension Attachment
This allows the court, at the time of a divorce or dissolution of a civil partnership, to order a deferred pension by means of a financial provision order – essentially a maintenance order. This usually only takes effect upon retirement.
In the meantime, the member’s pension benefits remain in the scheme and are still attributable to the member, but a percentage becomes “earmarked” to be paid directly to the former spouse upon the member’s retirement.
Since pension sharing became possible, pension attachment orders—which must be accompanied by an annex in Form P2—are only made in a very small number of cases, as they run contrary to the principle of a clean break and dismissal of all claims. They also end on the transferee’s death or remarriage. These orders are variable, and the court cannot control the timing of retirement.
Please feel free to arrange a meeting with a member of the Family Team at Churchers if you require any further advice or assistance. Call us on 01329 822 333
https://www.churchers.co.uk/services-individuals/divorce-cohabitation/
