Case Study: Paul’s Pension Surprise – The Overlooked Asset that Changed his Divorce

When married couples separate, they often consider their main financial assets to be the family home, savings and investments. Pensions can often be overlooked.

Take Paul for example, he considered the pension he built up over his 30 year marriage to be money for his retirement; something to consider in later years. 

In early conversations on separation, Paul and his wife gave the pension very little thought and agreed just to divide the other assets they hold jointly. This situation is not uncommon and it can come as a surprise to separating couples that the pension assets built up by one spouse can form part of the financial settlement on divorce.

Whilst Paul may have been the breadwinner of the family, his wife had also made financial and non-financial contributions to the household and family life. The court does not discriminate between roles in a marriage and it is seen that both parties should benefit from the financial pot they built together. Paul would not have been able to build up such a big pension pot if he were unable to work the hours he did.

In deciding what financial order to make, the court has to take into account the s25 factors such as the age of the parties, their needs, current and future income etc. Although Paul and his wife had reached an agreement to ignore his pension initially, in reality, following disclosure of the true value of the pension, it became clear that it was one of the couple’s most significant assets. A judge would be unlikely to make a financial order where one party retains all of the pension assets unless there was some offsetting elsewhere. That sort of calculation requires expert input. 

If pension assets are not properly considered, an apparently ‘fair’ settlement today, could lead to one spouse having substantially greater retirement security in future. Although Paul may want to retain all of his pension assets at the outset, out of principle, in reality he is still a way from retirement and those assets cannot be used to meet immediate needs such as housing or income. So whilst a settlement including a share of his pension initially may feel unfair to him, in sharing all of their assets both parties immediate and future needs can be met.

Pensions are complex assets and it is hugely important that they are given proper consideration at the outset, along with all of the other assets of the marriage, by obtaining Cash Equivalent Values as soon as possible and involving a Pensions on Divorce Expert where appropriate.