During the divorce process, when it comes to sorting out a financial settlement, all of the family’s assets need to be taken into account – including any pension belonging to either party. As part of the financial settlement, parties usually choose one of the three following options when it comes to their pension(s):
Attachment (previously known as earmarking)
A certain percentage of a partner’s pension is allocated to their former partner, and they will receive this when they retire. Benefits are not always guaranteed; and if the original owner of the pension remarries or dies, the former spouse will lose all benefits.
This is a simple option, which involves balancing the pension’s value against another matrimonial asset, usually the house. Though the simplest, this is not always the most favourable option.
A certain percentage of a person’s pension is moved into a pension scheme for their ex-spouse. The ex-spouse sometimes becomes known as a “Pension Credit” member of the particular pension scheme. This is usually the case with public sector pension schemes. In most cases, the ex-spouse has to choose a private pension scheme for the funds to be transferred into, and may need to receive the appropriate financial and legal advice.