Family Law Blog

Understanding pensions on divorce

15 October 2012, by Taylor King Family Law Solicitors

The Scottish Widows Workplace Pensions Report 2012 has revealed that only 15% of divorced women surveyed said that pensions were discussed as part of their divorce settlement.

In a long marriage the pension can be the largest asset after the matrimonial home. It is essential that the pension is valued together with the other matrimonial assets. His is particularly important where the pension is a defined benefit scheme such as final salary and includes the “uniform sector”, i.e. police, fire service and armed forces.

During the divorce proceedings the court will require a cash transfer value (“CTV”) from the provider of the final salary pension. This figure assumes that the member of the scheme will be leaving the scheme at the date of the valuation. This is invariably an incorrect assumption because the member will be continuing in his employment. As a result the CTV can be underestimated and expert evidence may be necessary to provide an adjusted CTV because the member will not be an early leaver from the scheme.

In order to obtain an expert report it is necessary to obtain an order from the court. The court would need to be convinced that the value of the pension is significant to the value of the other matrimonial assets or that the scheme is very complex. The adjusted CTV will reflect a fair value of the retirement benefits under the scheme, including discretionary benefits. The adjusted CTV could be as much as 30% higher than the initial CTV.

Although there was a rise of 11% in the number of pension sharing orders made in divorce proceedings during 2011 the Scottish Widows Workplace Pensions Report 2012 revealed that only 15% of divorced women surveyed said that pensions were discussed as part of their divorce settlement. 78% of married women did not know their entitlements in respect of their husband’s pensions on divorce. It is therefore essential that individuals considering or going through divorce proceedings take advice from expert family law solicitors about their financial entitlements.