Common Pension Settlement Options in Divorce
Every family’s circumstances are different, but there are several approaches commonly used when dealing with pensions during divorce.
Pension Sharing
Pension sharing involves transferring a percentage of one person’s pension into a separate pension arrangement for the other spouse. This approach allows both parties to have their own independent pension provision moving forward.
Pension Offsetting
Pension offsetting means matching pension assets with other assets. One spouse can keep more of the pension, while the other receives a greater share of the property than of the savings.
Pension Attachment Orders
In some cases, arrangements may be made for part of a pension income to be paid to a former spouse when retirement benefits become payable. Although less common today, this option may still be relevant in certain circumstances.
Mediation helps couples explore these options in a practical and informed way, considering their individual circumstances and future financial needs.
Understanding Pension Valuations
Before meaningful discussions can take place, it is important to understand the value of the pensions involved.
Usually, this starts with obtaining a Cash Equivalent Transfer Value (CETV) from pension providers. But other pensions, especially final-salary and public-sector ones, may need to be examined more closely.
During mediation, we can help identify the required financial information and discuss whether specialist pension advice may be beneficial in supporting decision-making.
Benefits of Using Family Mediation for Pension Disputes
Avoid Going to Court
Court cases can also be costly, lengthy, and heartbreaking. Through mediation, we can resolve disputes without a judge making the decision.
Save Time and Money
Mediation is typically a much faster and more cost-effective approach than litigation because it focuses on finding solutions instead of preparing for court hearings.
Maintain Privacy
In contrast to court proceedings, mediation is private and therefore allows sensitive financial issues to be discussed in a more protected environment.
Reduce Conflict
Family mediation helps diffuse tension and open lines of communication, fostering a more positive environment in which all parties are willing to cooperate.
Create Flexible Solutions
Every family’s circumstances are unique. Mediation allows couples to find out-of-the-box solutions that best fit their financial goals and values.
Frequently Asked Questions About Pensions and Divorce
Are pensions included in a divorce settlement?
Yes. Pensions are generally considered matrimonial assets and are usually included when calculating a financial settlement in a divorce.
Do pensions have to be split equally during divorce?
Not necessarily. The way pensions are treated depends on the overall circumstances of the case, including other assets, income, future needs, and retirement provision.
What is pension sharing in divorce?
Pension sharing involves transferring a percentage of one person’s pension into a separate pension arrangement for their former spouse or civil partner.
What is pension offsetting?
Pension offsetting allows one person to retain more of a pension while the other receives a larger share of another asset, such as property or savings.
Can mediation help us agree on what happens to our pensions?
Yes. Family mediation provides a structured process where couples can discuss pension arrangements and work towards a mutually acceptable agreement without going to court.
Do we need a solicitor if we use mediation?
Many couples choose to obtain independent legal advice alongside mediation. Once an agreement is reached, solicitors can help formalise the settlement where necessary.
Can pensions be discussed alongside other financial matters?
Absolutely. Financial mediation typically considers pensions alongside property, savings, investments, debts, and other financial assets.
What is a CETV?
A Cash Equivalent Transfer Value (CETV) is a valuation provided by a pension provider that helps establish the pension’s estimated value for divorce purposes.
Are public sector pensions treated differently?
Public sector and final salary pensions can be more complex than standard defined contribution pensions and may require specialist financial advice.
Is mediation cheaper than going to court?
In most cases, yes. Mediation is usually significantly less expensive than contested court proceedings and often resolves matters more quickly.
What happens if we cannot agree during mediation?
If an agreement cannot be reached, mediation can still help narrow the issues in dispute. Court proceedings remain available if necessary, but many couples find that mediation resolves most or all of their concerns.
Is mediation allowed to reduce the stress of pension negotiations?
Yes. Mediation allows for constructive communication and conflict reduction in these tough conversations when a neutral, supportive setting is available.