Understanding Pension Types
There are four main types of pensions to consider in financial remedy proceedings:
- Occupational Salary-Related Pensions: Defined benefit schemes linked to salary and length of service.
- Occupational Money Purchase Schemes: Defined contribution schemes where contributions are invested.
- Personal Pension Schemes: Private pensions often independent of employment.
- State Pensions: Includes the basic state pension and state pension entitlements accrued.
It is essential to establish the type of pension and its associated benefits upon retirement, as these factors influence how the pension is divided or offset.
Factors to Consider in Pension Division
Key considerations include:
- Pension Size: The cash equivalent value (CEV) for defined benefit schemes or the fund size for defined contribution schemes.
- Age of the Parties: Retirement proximity may affect the value and urgency of pension division.
- Scheme Benefits: Understanding survivor benefits, inflation-linked increases, and retirement options under the scheme.
Ways to Deal with Pensions in Financial Remedy Cases
- Pension Sharing Order:
- The most common method for dividing pensions.
- Provides a percentage share of the pension to be transferred to the other party.
- Shareable rights include occupational pensions, personal pensions, and sometimes state scheme rights.
- Enables each party to hold their share independently after the division.
- Pension Attachment Order (Earmarking):
- Less commonly used.
- Requires the pension provider to pay a proportion of the pension benefits directly to the former spouse upon retirement of the scheme member.
- Can include periodical payments or lump sums.
- Has limitations, as the receiving party is dependent on when the pension holder chooses to retire.
- Offsetting:
- No division of the pension itself.
- Pension benefits are offset against other assets, such as property or savings.
- One party retains their pension, while the other receives a greater share of non-pension assets to balance the financial settlement.
- Common in cases where the pension is less liquid or where other assets provide sufficient compensation.
Specialist Advice for Pension Cases
Complex pension arrangements often require expert guidance:
- Independent Financial Advisers (IFAs): For money purchase pensions and investment-focused schemes.
- Actuaries: For valuing defined benefit schemes (e.g., final salary pensions) and calculating fair divisions.
These professionals can provide detailed advice on pension valuation, taxation, and the impact of different orders, ensuring a fair outcome for both parties.
Conclusion
Pensions are a critical component of financial remedy cases and require careful consideration to ensure fairness. Whether through pension sharing, attachment orders, or offsetting, the court aims to balance financial resources while meeting the needs of both parties.
If pensions play a significant role in your financial remedy case, seeking expert advice is often essential to navigating these complex issues effectively.
For guidance on related legal processes, such as completing Form C100, explore our free guide to get started.