If you and your spouse or civil partner choose to divorce or pursue a dissolution, your individual and joint assets are taken into account. This includes both of your pensions. There are different options for what happens to your pensions in the event of a divorce or dissolution, such as pension sharing orders, offsetting, and pension attachment orders. Each option differs slightly and will suit different people depending on their situation.
A pension sharing order pretty much does what it says on the tin. It is a legally binding document issued by the courts which is used to decide what percentage of the pension each person will receive. The percentage is calculated using the value of the pension the day before the order is issued in court, and that is the final figure each person gets.
Offsetting your pension means that you can offset its value against other assets, such as the value of your family home. It is a pretty straight-forward option and helps you achieve a ‘clean break’ in the divorce or dissolution, the same way a pension sharing order does.
What is a Pension Attachment Order?
A pension attachment order differs from the other two options because it doesn’t necessarily involve a one-off monetary transaction taking place and is not completed upon the decree absolute being finalised. Instead, it acts as a kind of maintenance payment to your ex-spouse when you retire.
If you and your spouse or civil partners want to pursue a pension attachment order, you should contact a divorce solicitor who will be able to help you fully understand the legal side of how they operate. However, put simply, pension attachment orders instruct your pension scheme to pay a percentage of your monthly payments and/or a lump sum to your ex-spouse when you retire.
How does it work?
A pension attachment order can work well for couples where one is almost completely financially reliable on the other. In this situation the order would ensure that the financially dependent partner wouldn’t be left without any funds.
It’s worth noting that you can obtain a pension attachment order if you and your partner are opting for judicial separation, which means your marriage is not officially ended but you lead separate lives in the eyes of the law. This differs from a pension separation order, which those filing for judicial separation can’t apply for. A pension attachment order cannot take place without the court’s involvement.
If you and your spouse opt for a pension attachment order but then they remarry before you retire, the percentage of periodical pension payments agreed to in the original order will stop being paid from that point onwards.
Advantages and disadvantages
The one main disadvantage to pension attachment orders is that they don’t allow for a clean break in the divorce or dissolution because they create a legal and financial bond between you and your spouse for life. However, for some couples this is absolutely fine because their divorce or dissolution is amicable.
Also, if the partner who owns the pension fund dies before retirement then there is a risk that the other partner won’t receive any of the pension, however this risk can be decreased with the help of a specialist divorce solicitor.
Pension attachment orders are most advantageous for couples opting for judicial separation or couples where one partner is very dependent on the other financially. It is, in some ways, a more flexible option than pension sharing orders or offsetting, which are both very final, which some couples find too daunting.