Divorce courts are failing to take account of couples’ pension savings. Fewer than one in five divorces where a financial award is made include provisions for pension sharing, says the Ministry of Justice.
Divorce law is meant to protect the interests of both spouses, for whom pension savings are often the second most valuable asset after the family home. In many cases, one partner has substantially more pension savings than the other. In such cases, the divorce courts have two options for splitting pension funds.
Under a Pension Sharing Order, a share of one spouse’s pension fund can be transferred to the other’s pension arrangements.
Alternatively, a Pension Attachment Order leaves the pension fund with the first partner, but gives their spouse a right to a share of the income when it is eventually drawn down. While both options can be complicated, they do provide divorcing couples with an equitable way to share pension savings.
Some couples have enough assets for the courts to be able to adjust the split of the rest of their wealth to take account of pension inequality, avoiding the need for complicated pension arrangements. However, it is crucial for the partner receiving cash rather than pension benefits to take advice on how to invest this money
for retirement.