Many divorcing couples overlook the importance of pensions when sorting out their finances during separation and in any subsequent divorce. This can be an enormous mistake, as pensions are often valuable, provide security, and sometimes a guaranteed income stream upon retirement.
In England and Wales, there is no time limit for making a claim against an ex-spouse’s pension following divorce, provided a financial order has not already been made. Without a final financial order, either party can therefore make a claim against their ex’s pension even decades after the breakdown of the marriage and many years after the divorce has been finalised.
What does the court consider when receiving a claim against a spouse’s pension many years later?
Making a claim against an ex’s pension after many years or decades since divorce can be complex, and a claimant will need to clearly set out why an application was not made earlier. In particular, when receiving a claim against an ex’s pension some time after divorce, the court looks at the following:
- The length of time since the divorce. Essentially, the more time that has passed, the more likely it is that the court will question the fairness of allowing a late claim to be made
- The reason for the later claim. The court will want to understand why the claim is being made so long after the divorce
- Any final order that may have been made in previous financial proceedings and whether it relinquishes the claimant’s right to claim against the pension
Will my spouse receive the benefit of the pension if it has increased significantly since divorce many years earlier?
If no financial settlement was agreed upon at the time of the divorce, including no pension sharing order, the situation becomes extremely complex.
In the absence of a financial settlement, either party may still make a financial claim against the other, even many years after the divorce. This includes claims on pensions. The court has the discretion to consider such claims and may decide on an appropriate settlement based on current circumstances.
If a later pension claim is made, the value of the pension will be assessed at the time of the court proceedings, not at the time of the divorce. This means any significant increase in the pension’s value since the divorce could be taken into account.
The court will consider various factors in deciding how to divide the pension, including the length of the marriage, the contributions made by each party (both financial and non-financial), and the needs and resources of each party. The court aims to achieve fairness, which could involve sharing the increased value of the pension and will assess its current value and any other relevant factors in order to reach a fair division.
Given the complexities involved, it is crucial to seek legal advice to understand the potential outcomes and to ensure that any financial claim is presented effectively. A solicitor with expertise in family law and pensions can provide guidance tailored to your specific circumstances and help you address why it has taken so long to make the claim.
In what ways could a pension be shared?
When sorting out finances, pensions accrued by either party to a marriage are put into the matrimonial pot comprising everything you and your ex owned throughout the marriage. Pensions accrued before the marriage or after separation may also be available for sharing, depending on the circumstances of the case.
The way in which pensions are most commonly dealt with include:
- Pension sharing – this is an order made by the court setting out how pensions are to be shared and tells the pension providers of the pension fund to transfer a percentage of the value of the pension(s) to the chosen pension scheme of the former spouse.
- Pension offsetting – a former spouse surrenders their claim against the other’s pension in exchange for assets of a similar value.
- Pension attachment – this orders a percentage of the pension to be sent to the other spouse each week or month. The former spouse receiving the pension has to wait until it is in payment before they can benefit from it.
Working out what you may be entitled to may be determined by, but not limited to, the following:
- The length of the marriage and age of the parties
- Any dependent children and consideration of who will be their primary carer
- Income, earning capacity, and needs of both parties
- Contributions made towards the marriage.
The starting point, even many years later, as to the division of assets, including pensions, is 50:50. However, the factors listed above can be used to depart from this starting point.
How can I protect future claims against my pension?
The best way to protect a pension and prevent an ex-spouse from making a claim against it in the future is to resolve financial issues as soon as possible after separating and ensure the agreement is set out in a court order. The agreement should address all financial issues, including pensions. As long as there is a final binding order in place providing for a clean break, then you are protected against future claims.
You may also consider a pre-nuptial agreement setting out how assets, including pensions are to be divided in the event of a future divorce. This is not in itself a legally enforceable document, but it can act as a strong protective measure for parties entering into it. There are stringent requirements to follow for the court to give effect to a prenuptial agreement: it must be agreed between the parties and freely entered into, and both parties must have obtained independent legal advice well in advance of the wedding taking place.
Ideally, all issues arising from the breakdown of the marriage should be dealt with as soon as possible following separation. This allows both parties to move into the future with certainty and without worrying about a later claim by an ex-spouse.
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