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Tips for divorce settlements - pensions and divorce

Tips for divorce settlements - pensions and divorce

It is not uncommon for divorce settlements to include a person's pension, as it can be more valuable than your house. It is therefore important not to disregard pension rights when determining how matrimonial property is to be divided on divorce.

In Scotland, only pension assets which have accrued during the period of marriage comprise matrimonial property.

There are three ways in which your pension can be dealt with on divorce:

  1. Pension sharing: The pension policy can be shared by transferring a portion of the funds into another policy in the name of your spouse, who then acquires his/her own pension rights. This is usually agreed following separation and implemented after Decree of Divorce is pronounced by the Court.
  2. Offsetting: The value of one party's pension can be offset against another asset which is to be retained by the other. For example, if the equity in the family home is equal to the value of one party's pension, then one party could agree to transfer his/her title to the house in exchange for keeping all of their pension provision.
  3. Earmarking: This is rarely used in Scotland but is nevertheless a competent order where the Pension Scheme pay part of the pension holder's lump sum or death benefit entitlement to the holder's spouse. The benefitting party must wait until his/her spouse dies or retires before receiving their entitlement.

Not all pension rights are the same and it is important to take legal advice at an early stage to ensure your interests are protected in any divorce settlements. Get in touch if you'd like to discuss your own circumstances in more detail.

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Written by : Lynne Collingham