The Treatment of Pensions in Divorce Proceedings in England (03)

 

 

The Welfare Reform and Pensions Act 1999 is intended to give the divorce courts more powers to deal with pensions in divorce and, in particular, to enable them to overcome the problems which have been mentioned earlier in relation to off setting a pension against other assets and also in relation to "ear marking" orders.

The principle is quite simple. The Welfare Reform and Pensions Act enables pensions to be split for the first time. Basically, the courts can order a pension provider to split a pension so that both husband and wife have separate, independent pensions. The husband's pension fund (typically it is the husband although that does not have to be the case) is split so that there are now two separate pensions - one for the wife and one for the husband. There are several points to notice about this:-

(1) There is no requirement to split equally. It is done on the basis of percentages. The percentage which will be transferred to a pension for the wife will depend on the circumstances of the case. If, for instance, the wife has already received the bulk of the other assets of the marriage it would probably be wrong for her also to receive 50% of the husband's pension. A lesser percentage might be appropriate although it has to be stressed that the exact percentage depends upon individual circumstances which vary enormously.

(2) The wife no longer has to wait until her (ex) husband takes his pension benefits in order to take her pension benefits (as is the case under "ear marking"). Under pension splitting she has her own independent pension provision and when she chooses to take those benefits will depend on her choice. She also does not lose this independent pension if her husband happens to die before reaching pensionable age.

(3) The pension is split as of a given date. Say, for instance, the pension trustees inform the court that the husband's pension fund has a certain value at a given date. The pension is split using that date and these figures. The relevant percentage of the fund's value as of that date is transferred to the wife but she does not benefit from any further contributions paid into the pension fund by the husband from that date onwards. This enables the husband to rebuild his pension provision if he wishes.

 

These are the main principles of the Welfare Reform and Pension Act 1999. Since pension provision is often the second largest capital asset of the marriage after the former matrimonial home it is almost always something which looms large in a divorce settlement. And, as has been seen, there are different ways of dealing with it depending on what the husband and wife want and on what is appropriate in any given case. These pages attempt to summarise the pension position but in practice it can be rather more complicated.