Divorce & Pensions

Divorce & Pensions. In the case of divorce one of the major marital assets is likely to be the pension fund built up by one of the partners, often the husband.The Pensions Act 1995 introduced the concept of "earmarking" under which a former spouse would receive a percentage of the pension scheme member's pension on the latter's retirement.

Although regarded as a step in the right direction, this proposal was viewed as unsatisfactory because it meant that a divorced couple remained financially linked until the retirement of the pension fund holder.

Pension splitting was the preferred solution to allow a clean break in divorce. Further legislation was enacted as part of the Welfare Reform & Pensions Act 1999. From December 2000 pension sharing (the term which superseded pension splitting) allowed for occupational pensions, personal pensions, stakeholder pensions and state second pensions to be divided between the divorcing parties.

Pension sharing does not apply to the basic state pension. Pension sharing is only available to couples who have been married. It is not compulsory and couples may still opt for an earmarking arrangement or a way of offsetting the value of the pension fund asset.

See also:Moneyextra's guide to Divorce & pension rights

Last Updated: June 2007 © Moneyextra.com

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