There are usually a number of financial issues to be resolved following the breakdown of a marriage. These often include dividing capital assets and pensions and the provision of maintenance for either party of the marriage or any children of the family.
The Court has the power to make Orders including maintenance for one of the parties (and in certain circumstances for any children of the family), property adjustment orders, lump sum orders and pension sharing or attachment orders.
The starting point in any financial settlement is to establish the nature and extent of each parties income, assets and liabilities.
The court has very wide discretion and takes various factors into account when considering what Orders should be made. The Court will consider all the circumstances and will give first consideration to the welfare of any children of the family. The court will then have regard to the following factors:-
- The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future
- The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
- The standard of living enjoyed by the family during the marriage
- The age of the parties and the duration of the marriage
- Any physical or mental disability of either of the parties to the marriage
- The contributions which each of the parties has made or is likely in the foreseeable future to make for the welfare of the family
- The conduct of the parties
The starting point in any financial settlement is to establish the nature and extent of each parties income, assets and liabilities. Both parties will be expected to provide full and frank financial disclosure of their respective financial positions whether you reach a voluntary agreement or not. The Form E Financial Statement is a good template to use to ensure that all the relevant information is provided.
It is important that pensions are not overlooked when considering a financial settlement on divorce as consideration will need to be given to how both parties needs can be met on retirement.
It is important that pensions are not overlooked when considering a financial settlement on divorce as consideration will need to be given to how both parties needs can be met on retirement. If either party has any pension funds then they should be considered. Details of the pension fund including the cash equivalent value should be obtained from the pension provider along with information about any other benefits. The cash equivalent value reflects the capital value of the pension benefits which have been accrued to date or which are already in payment. With some schemes the transfer value may be different to the actual fund value and advice will need to be sought from a pension expert.
When considering if a private pension will form part of the divorce settlement there are three main ways of dealing with pensions on divorce:-
Pension sharing – this allows a percentage share of a member’s pension to be transferred into a pension scheme in the ex-spouses name as their own pension fund
Offsetting – this involves balancing the value of a pension against another asset. For example if one party retains their pension fund the other party retains a bigger share of the other assets
Attachment – this is where a percentage of a member’s pension is set aside for the ex-spouse to claim on retirement
There are situations where a private pension would be more likely to form part of a divorce settlement. For example one party may have taken time out of work to care for children and not had the opportunity to build up their own pension where the other party may have built up a significant fund.
In some cases the pension may be the only significant asset and in some cases the pension fund may be even more valuable than the family home.
In some circumstances it may be appropriate for there to be an unequal division of the pension capital. For example if one party has a greater income need in retirement due to a health problem or disability.
There are situations where a private pension would be less likely to form part of a divorce settlement. For example where there is a short childless marriage or where the parties divorcing are still both young and retirement is some time in the future.
A pension might not be considered as part of a divorce settlement where one party has other non-pension income available to them in retirement that is sufficient to meet their needs.
Pensions are complicated and expert assistance will often be required from an actuary and an independent financial advisor.
It is important that you try and resolve financial issues amicably without Court proceedings. There are a number of options available from direct negotiations, lawyer led negotiations, mediation and collaborative law.
If you can reach an agreement then a Consent Order should be prepared to outline the agreement reached to ensure that it is legally binding.
Not all cases are settled by voluntary agreement and if an agreement cannot be reached within a reasonable period of time, or if one party will not co-operate or provide financial disclosure, then it may be necessary to commence court proceedings.
You can also visit the Chafes Hague Lambert Family Department, we have a range of useful information sheets which can be accessed here.
The Family Justice Council has prepared a useful guide designed to help litigants in person called Sorting out Finances on Divorce. The guide provides a general overview of the law and some explanation of issues that may arise including pensions. You can access the guide here.
Posted on February 8, 2018