When divorcing at a later stage in life pensions take on a sharper focus. Often one party will have acquired more pension and that could have been acquired before the parties marry. The court therefore has to make the difficult decision as to what is a fair division of the parties’ pensions.
How do the needs of the parties affect pension division in divorce?
To assist The Pensions Advisory Group reported in 2020 that in a needs case the court will look to share pensions to meet the needs of the parties. Whether that pension was acquired prior to the relationship will carry little weight if the financial needs cannot be met without recourse to this pension.
There has been further reinforcement of this in the case of W v H [2020] that where the pension represents the sole or main mechanism for meeting the income needs of the parties post retirement and where the income produced by the pension funds falls short of producing a surplus over needs, then it is difficult to see that excluding any portion of the pension has justification.
So, what does this mean to you in practice and what is a needs case?
Courts have a wide discretion and when making decisions upon pension division in divorce they have regard to the factors set out in section 25 of the Matrimonial Causes Act. These include the standard of living of the parties and this is relevant to the setting of a parties needs.
Whilst some adjustment needs to be made for the fact that there will now be two households, the court will not ignore the standard of living the parties have enjoyed. Therefore, if a party is used to having the monies to spend generously on food, personal care, an allowance will be made for that.
Calculating income and analysis the parties needs
The court will base its decision on a careful analysis of the parties income from all sources in retirement including their pensions. There is then a careful analysis of the parties needs.
To assist the court with it’s analysis of the income from the parties pensions, an actuary is employed to provide a joint report to the court of the share required to provide certain levels of income up to equalisation. Using that report the court can then assess the share that is required to meet the parties needs.
Pension division in divorce – next steps
To make a decision on an appropriate share it is important to have expert advice on the likely approach to your pension assets. If you have a larger pension than your wife or husband we can advise you on the extent to which you will be expected to share that. If you have the smaller pension we can help you achieve fairness.