It is often the case that women have less pension wealth than men. This can have a bearing on the financial implications of divorce. A Pensions Policy Institute report published in 2019 stated that women in their sixties have a third of the private pension wealth than that of men.
Earlier this year, Parliament published Dr Rajiv Prabhakar’s report entitled “The Gender Pension Gap”. The report addressed many aspects of the gender pension gap, including divorce. Dr Prabhakar’s report proposed potential reforms to narrow the gender pension gap. Included in these reforms was a proposed change in legislation to ensure that pension rights are considered on a mandatory basis as part of divorce.
The importance of considering parties’ pensions cannot be understated. A report compiled by Scottish Widows highlighted how women are disadvantaged in divorce cases whereby pension assets have not been considered.
Pension assets should always be considered as part of divorce proceedings. However, in cases where the party in the weaker position has not sought legal advice, pension assets may be overlooked. Further, pensions are dealt with in a specific way in divorce proceedings and this can often cause confusion for unrepresented spouses. Often, an actuary will be required to provide an expert report for court purposes.
There are many ways that pensions can be dealt with in divorce. Two of the most frequent ways in which pensions are dealt with are set out below.
Pension sharing orders
Pension sharing orders are often an appropriate way of dealing with pension disparity between the parties. The court can order that a percentage share of a spouse’s pension be transferred to the other spouse in order to achieve equality and fairness. However, pension sharing orders are only made in approximately one-third of divorce cases.
It is not uncommon for the party with a more generous pension to receive a smaller share of another asset, effectively offsetting the other spouse’s entitlement to a share of their pension.
The Gender Pension Gap report recommends that the government introduces legislation to ensure that pension rights are considered by the court in any divorce and not just where an application for financial remedy has been made. Our fee earners ensure that full and comprehensive financial information is sought when advising clients with respect to their financial claims arising from divorce.
If you are considering a divorce or seek further information about the issues raised above, please contact our offices on 02920 197203.