Divorce & Pensions

Applying for a Financial Court Order when you Have Reached a Divorce Financial Agreement If you have reached an agreement with your ex-husband or your ex-wife about how your assets will be split after your divorce you may question if you need a financial court order. A divorce solicitor will tell you that a court order is necessary and explain what could happen if you don’t obtain an order. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form. Why you need a financial court order If you have reached a divorce financial settlement by agreement, you still need a financial court order. There are several reasons why you need an order: It gives you financial security – if your ex-partner changes their mind and wants more than you originally agreed upon you can rely on the court order to prevent additional claims for cash. For example, your ex may say the original agreement was unfair because the value of your business has gone up more than the equity in the family home or that they need more because they did not get a share of your pension when they negotiated the financial deal You can enforce a court order – you may think that your ex-spouse won't breach your agreement but, for example, if you agreed that the family home would be sold, they may be reluctant to sell the property if it means they have to downsize. A court order can include the mechanics for the sale and if a spouse is resistant to a sale the court can order that a judge has the authority to sign the transfer documents. You may think it unlikely that you will need to enforce an order but situations change, such as your ex-spouse or you meeting a new partner, and that altering the dynamics Pensions – if your financial agreement includes pension sharing the pension administrator is not allowed to implement your agreement until they have a financial court order, pension sharing annex, and the final order of divorce   Third parties – you may need a financial court order where third parties are involved. For example, if one of you is at potential risk of bankruptcy with the involvement of a trustee in bankruptcy. For example, if a mortgage company will only transfer the mortgage into your ex-spouse’s sole name if the transfer is made under a court order or if there is a spousal maintenance order so your ex-spouse can persuade the mortgage company that they have enough income to be able to take the mortgage over on their own Clean break – some financial agreements include a clean break to stop any future financial claims by you or your ex-spouse. If you have negotiated a clean break, it is important to have the security of a binding financial court order that endorses and confirms the clean break [related_posts] Applying for a financial court order If you have reached a financial agreement through direct discussion, solicitor negotiations, or family mediation there is normally no need to go to a court hearing to get your financial court order. Your divorce solicitor can send the paperwork to the court for approval and, in the vast majority of cases, a judge will agree to make the financial court order with no alterations to the draft order or only minor ‘drafting tweaks’. Broken down into stages, to obtain a financial court order you have to: Check there is an agreement that is capable of being made into a financial court order – if you negotiated your agreement direct then your divorce solicitor can check your agreement for you Check if the court can make a financial court order – the court can only make a financial court order once you have obtained a conditional order of divorce. If you got divorced some time ago and have a decree nisi of divorce the court can still make a financial court order Check if any relevant third parties are OK with the agreement. For example, the mortgage company if a house and mortgage are going to be transferred into one spouse’s name or a pension administrator if a pension sharing order is being requested Draw up the draft financial court order and exchange it with your ex-spouse’s solicitor and make any changes needed Swap statements of financial information summarising your assets and income. These statements are filed in court with your draft financial court order. The court will not approve a financial court order unless these statements are prepared and filed Send the draft financial court order to any relevant third parties. For example, to a pension administrator for their approval of the wording of the pension sharing order Ask the court to approve the financial court order by sending the court the required paperwork and court fee. In the vast majority of cases, the judge will make the financial court order requested if the order has been properly prepared and the statement of financial information explains why the court order has been agreed upon Answer any questions the court may have on the proposed financial court order Once the sealed financial court order is received from the court send it to any relevant third parties. For example, the pension administrator, financial advisor, or property solicitor if the financial court order includes pension sharing, investment transfers, or the transfer of property Finalise the divorce proceedings as without the final order of divorce the financial court order cannot be enforced Diary up. If the financial court order includes spousal maintenance your divorce solicitor should check and diary up review dates for increases in line with retail price index rises or end dates and make sure everything in the court order has been sorted out, such as the implementation of a pension sharing order, the taking out of life insurance or changes to a pension nomination That list may look exhausting but the job of a divorce solicitor is to convert agreements into financial court orders. At Evolve Family Law we recognise that if you have reached a financial agreement, you do not want to hang around whilst divorce solicitors get out their fountain pens to prepare financial court paperwork and then post it back and forth between spouses and solicitors. Evolve uses technology to standardise and speed up the process of drafting family court orders, and as importantly, to make the obtaining of a financial court order more cost-effective and value for money for you. It is the combination of experience and technology that means Evolve Family Law can offer transparent pricing and fixed fees for financial court orders. We are proud to say that we are one of the first law firms in the country to publish our fees online in a handy user-friendly guide without hidden extras as the quoted fees include VAT. Some financial court orders are more complicated than others, especially where there are businesses or trusts involved, and in other situations, you may not be able to reach a financial agreement and so need advice on the financial court process. Whatever the situation you find yourself in, Evolve Family Law can help with friendly approachable expert assistance combined with transparent costs. The first step is to contact us to discuss how our divorce solicitors can help you. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form.

When it comes to pension rights and answering the question ‘do I have to share my pension if I divorce,’ the frustrating response to hear from a Manchester divorce solicitor is that there isn’t a yes or no answer to your pension rights question. In this blog we look at just how complicated it can be to unravel pension rights on divorce and answer some of the common questions that are raised by husbands or wives worried about the thought of having to share their pension on divorce.   Pension and divorce experts Our Manchester divorce solicitors are often told by husbands or wives that their pension can't be shared on the breakdown of their relationship for a whole variety of reasons including: The pension can't be touched until I retire so can't be shared now The pension was started before the marriage The pension is linked to the family business You can't share a final salary pension on divorce The pension isn’t valuable enough to share on divorce My employer won't let me share my work pension on divorce Pensions can't be shared if you are in a civil partnership and not married.   All of those are wrong! If you start off on ‘the wrong foot’ with misinformation about pension rights on divorce it is very easy to either: Believe your pension can't be touched and therefore be unwilling to negotiate on pension rights and divorce Assume that your husband or wife's pension can't be worth much and is incapable of being divided or shared until you both reach retirement age.   To avoid reaching fixed views on pension rights and divorce it is best to take early legal advice from Manchester divorce solicitors and financial advice so you know where you stand legally and financially. Early advice means neither of you should have entrenched pension positions and be more open to negotiating a financial settlement that may or may not involve sharing pensions.   Joint pensions Many husband and wife's assume that their pension is a joint pension with their spouse. A Manchester divorce solicitor or financial advisor will tell you that a pension is only legally owned by one party so technically the pension will belong to you or to your spouse. Even though you may or may not own the pension, on divorce most pensions are capable of being shared so that the non-owning husband or wife gets a share of the pension.   Pensions can be a complex topic as there are so many different types of pension. You may be adamant that your pension is joint with your husband or wife because: You are both shareholders and company directors in a family business and have a pension linked to the business You both set up private pension schemes at the same time You have property or land owned in a pension fund.   No pension is a jointly legally owned asset. Even if you and your spouse both have funds in a SIPP or own a business property within a pension fund you will both have individual shares in the pension pot.   Although pensions are not joint assets because they are not legally owned by both of you they will normally be taken into account in any divorce financial settlement and can be shared or the pension value offset against the value of other family assets. Are pensions ever ignored in divorce financial settlements? In most separations and divorces pensions are not ignored in the divorce financial settlement. That is because the pension is often the most valuable asset after the equity in the family home.   There are a few limited family scenarios where the value of the pension won't feature highly, for example: A young couple with no children A very short marriage with no prior period of cohabitation before marriage and no children A marriage where the husband and wife agreed to ignore the value of pension assets if they separated or divorced by signing a prenuptial agreement or a postnuptial agreement. This is OK if the terms of the prenuptial agreement or postnuptial agreement meets the needs of the husband and wife.   Are pensions always shared equally? Pension assets may not be shared at all, for example, you may agree or the family court may order that one of you gets a bigger share of other assets, such as the equity in the family home or savings.   If you do agree to a pension share or the financial court order includes a pension sharing order then your husband or wife could get a percentage from one to a hundred percent of your pension fund.   The court is more likely to make a financial court order that includes pension sharing where: The value of the pension funds makes it worthwhile to share the pension. If the pension only has a small value then the administrative costs of sharing the pension may not be justified There are sufficient assets to not require one of you to need to receive all or the majority of the equity in the family home to rehouse yourself and to offset the value of the pension.   Even if you and your spouse or the family court orders that a pension is split equally between husband and wife that doesn’t necessarily mean that you will both get the same amount of pension income from your equal share of the pension fund. The pension income differential can be down to age or gender. That is why many Manchester divorce solicitors and family courts prefer to arrange for pensions to be shared to achieve equality of pension income on retirement rather than a straight equal division of the capital value of the pension fund.   How to value a pension in a divorce financial settlement It is often thought by a husband or wife that valuing a pension in divorce and financial settlement proceedings is easy as you can just rely on the annual statement that pension administrators provide. Most of these annual pension statements will include what is said to be the ‘cash transfer value’ of the pension fund.   If the fund value of the pension is accurate then you may think it is a straight forward process to either agree a pension offsetting figure (the amount that one of you will receive for not getting a share of the pension) or agree the percentage of the pension share. However, the cash transfer value of a pension can be wildly inaccurate or misleading. For example, two pensions may both have a cash transfer value of £500,000. You would assume therefore that as both pensions are worth the same amount they will produce the same pension income on retirement. That’s not the case because one pension may be a final salary pension and the other a personal pension or a SIPP.   Getting expert legal advice and actuarial pension advice can be crucial in helping you: Accurately value your pension assets Reach a fair financial settlement.   Can I ring fence my pension and leave it out of the financial settlement? Manchester divorce solicitors are often asked if pensions can be kept out of divorce financial settlements. Even if you both agree to ignore the value of a pension the asset still needs to be disclosed. A husband and wife are under a duty to provide full financial disclosure. Failure to give information about your pension isn’t in your interests. If you do not disclose an asset then any agreement or financial court order could potentially be overturned at a later date because of the lack of full and accurate financial disclosure.   It therefore pays to disclose the existence of all assets, including pensions, even if you and your spouse chose to ignore the value of the pension in your financial settlement negotiations.   Many husband's and wife's struggle with the idea that the value of their pension may not be ignored in the financial settlement, even though: They started the pension before the marriage and all the pension contributions were made prior to the marriage Their pension is in payment Their spouse is in a new relationship and so they don’t think that he/she needs a share of their pension They signed a prenuptial agreement to say that the value of a pension would be ignored.   Whilst all of the above point are very valid, a family court looks at a range of factors when deciding whether or not to make a pension sharing order as part of a financial settlement. For example, the court will look at both a husband's and wife's needs including pension income needs but will also factor in the length of your marriage, your ages and any pre-marriage contributions or wealth and the existence of any prenuptial agreement or postnuptial agreement.     When is a pension shared? Many husband's and wife's are very keen to avoid a financial settlement that includes a pension sharing order because they mistakenly believe that their spouse will continue to receive the benefit of their hard work and ongoing pension contributions and pension growth from the date of the financial settlement until eventual retirement and pension draw down. That isn’t the case.   If you agree to your pension being shared or the court makes a pension sharing order after a contested financial settlement court hearing then: The pension sharing order will be implemented after the pension administrators receive the financial court order, pension sharing order annex and the decree absolute of divorce. The pension administrator has four months from receipt of the relevant paperwork to implement the pension sharing order Once the pension sharing order has been implemented there will be two separate pension pots (assuming there isn’t a one hundred percent pension sharing order) and any future pension contributions made by you after the order has been implemented will be credited against your pension pot and you will get the benefit of all the pension and investment growth in your pension pot In most cases you will be able to decide when to take your pension completely independently of when your former husband or wife choses to retire and get the pension income from their share of the pension. The position is more complicated if your pension pot consists of property and is a Self-invested pension plans (SIPPs) or is a Small self-administered schemes (SSASs). It is also sensible to take detailed advice about the earliest date you will be able to take the pension income as the pension rules may be different for you and your former spouse and it is best to be fully informed before agreeing to a pension sharing order.   [related_posts] Should I pension share or pension offset? The question of whether you should pension share or offset is really down to your priorities. However, if you are not able to reach a financial settlement with your husband or wife by agreement then the decision over whether to pension share or pension offset may be taken out of your hands as a family judge will decide how your assets , including pensions, should be divided.   If you agree to a pension offset then the value of the pension is offset against other assets owned jointly or individually. This may be vital to you if your priority is to stay in the family home or to keep your shareholding in the family business or family farm. Equally, it can be short sighted to ‘put all your eggs in one basket’ and just get equity in the family home rather than a share of your spouse’s pension.   You may think that, in time, you can downsize and get money out of the family home to fund your retirement. However, the cash from the sale of a family home may not generate anywhere near as much in pension income as a share in your spouse’s final salary pension scheme would have.   Alternatively, you may be adamant that you want to keep one hundred percent of your pension because you realise just how valuable your National Health Service, police, fire service or final salary pension is in comparison to the income you could realistically generate from the pension offsetting figure. However, you may benefit from reality testing your plan to keep all your pension and get less or no equity from the family home as that may mean you struggle to rehouse yourself so you are asset poor and pension rich. All very well for the future, but does it mean you will have a tough time of it until your hoped for retirement and is it worth it?   When it comes to pensions and divorce financial settlements there are always choices to be made, from how you value the pension to whether you share or offset the pension. Taking expert legal advice from Manchester divorce solicitors can help you make informed choices, looking at the short and long term needs of you and your family.   Whitefield based Evolve Family Law solicitors are approachable and friendly, providing pragmatic expert divorce, pension and financial settlement solutions. Contact us today and let us help you.

Pension claims on divorce are always a tricky issue because pensions are not the same as any other kind of asset. This is because a pension cannot be fully accessed straight away, whereas all other assets usually can. One way of dealing with them is to split the pension in two (called 'pension sharing'). However, this kind of solution has never been very popular since it was introduced over 15 years ago, partly because the person with the pension tends to have an emotional attachment to it, partly because the person without the pension wants cash (or another asset) instead of the pension, and partly because to achieve a fair split you need a report from a financial expert, which normally costs £1500-£3000 in extra fees. So most people resolve the pension issue by 'offsetting' the value of the pension against other assets in the matrimonial 'pot'. For expert help with your Divorce and Pension call our team of specialist divorce lawyers or complete our online enquiry form. Comparing the Values of Pensions However, this leads to another problem: How do you compare the value of a pension against the value of another asset? Until now, the way this was done in most cases was to take the cash equivalent value ('CEV') of the pension and then lop off a bit (non-scientific i know!) to reflect the fact that it could not be fully accessed straight away. This approach has a number of difficulties, partly because a CEV can underplay the true value of the pension (particularly with final salary schemes) and partly because the 'lopping off' figure is not scientific. A change of approach is in the case of WS v WS [2015] EWHC 3941 (Fam) 11 December 2015. In this case, the 'offsetting' involved was actually between two different kinds of pension; a money purchase scheme held by the husband, and a much larger final salary scheme held by the wife. The other wrinkle was that the husband and wife were already retired. However, I think the principle could apply to offsetting between a pension and any other kind of asset. Instead of using the pension CEV, the court looked at the projected future income from the larger pension (always a more reliable indicator of the true value of the pension), worked out what part of that the husband should have, fed that figure into a 'Duxbury' calculation (the calculation usually used by family courts to capitalise spousal maintenance payments) and the resulting capital figure was the value of the cash payment to the husband to offset his claim against the wife's pension. How Do Pensions Claims Work? Applying this guidance to a 'real world' example: Husband and wife are both 50 years old. Matrimonial home with equity of £500k. Husband has pension with a CEV of £500k and projected future income at age 60 of £20k p.a. Wife has no pension. Husband wants to keep his pension and wife wants more equity in the house to 'offset' the pension. Before any offsetting, wife would otherwise be walking away with £250k from the house. Wife's fair share of the projected pension income is £10k p.a. from age 60. Duxbury calculation says that the capital payment which would produce an income of £10k p.a. from age 60 is £160k. Discount applied for accelerated payment of the £160k (under a pension sharing order wife's share of pension would only start to be paid in 10 years). This is still going to be an arbitrary figure. Say 25% = £40k So the offset figure for the pension is £120k and the wife therefore takes £370k from the house, and the husband takes £130k from the house and keeps his pension. It is going to be interesting to see whether pension liberalisation changes the courts' views of pension offsetting any further. We previously had an indication that the courts will treat pensions more like bank accounts from SJ v RA [2014] EWHC 4054 (Fam) but this is an over-simplification, given the tax consequences of unlimited withdrawals from a pension, but the case of WS v WS demonstrates more enlightened thinking. [related_posts]   For expert help with your Divorce and Pension call our team of specialist divorce lawyers or complete our online enquiry form.