When a relationship comes to an end and assets are divided up, a pension pot is very often the most valuable capital asset after a home. With civil partnered and gay married couples now having the same legal rights as straight married spouses, those who do not prepare may find their expected pension benefits significantly impacted when they split up.
Lee Trubshaw, Partner at solicitors Bradin Trubshaw & Kirwan LLP, explains the ways in which pension benefits can be dealt with.
Statistically it is too soon to quantify how many same-sex marriages will end in divorce though it is known that hand in hand with the increasing number of civil partners is the rising number of dissolutions – by the end of 2013 4.5% of male partnerships and 8.4% of female partnerships in England and Wales were legally dissolved. Unless you have a prenuptial agreement which excludes certain assets from your marriage or civil partnership, all financial assets, including pension rights, will be examined and divided by the Court.
There are two main ways in which pension benefits can be dealt with as part of a divorce or dissolution settlement – offsetting and sharing. The starting point for valuing pension benefits is the cash equivalent transfer value (CETV). Both parties have to disclose the value of their pension pot(s) and/or accrued benefits at the date of divorce/dissolution.
Pension offsetting is a commonly used means of dealing with pension benefits. Each person retains their own pension rights with the value of the assets taken into consideration when valuing all matrimonial/partnership assets and the proportion of other assets adjusted accordingly to equal value. So, for example, if one party gains the home then the other may receive the entire pension to offset the value of the house.
Pension sharing has been an option for straight couples whose divorces are filed on or after 1 December 2000. With the same now applying to same-sex marriages and civil partnerships this means that a pension is split to give both parties a separate pension and is based upon the transfer value of the pension and assets.
Under current regulations which apply up to 5 April 2016, the basic state pension cannot be split on divorce or dissolution of a civil partnership although it may be possible to claim a basic state pension based upon an ex-spouses/partner’s National Insurance contribution history. It is also taken into account when deciding how much each party should have in respect of pensions and will therefore still form part of the pension pot.
Pensions and Unmarried/Non Civil Partnered Couples
Cohabitees do not have any legal right to each other’s pensions.
For advice on civil partnerships, same-sex marriage and other legal matters contact Bradin Trubshaw & Kirwan LLP on 01543 88175 for a consultation or email firstname.lastname@example.org.