PENSIONS
On relationship breakdown
Pension Law
The issue of pensions has become increasingly more important to parties who are divorcing or a civil partnership dissolution. The ways in which pensions are dealt with by the courts are as follows:
Pension Offsetting
This is the means whereby one spouse/partner will receive more of the available capital in return for not having any order in relation to the other spouse’s/partner’s pension.
Pension Attachment
This is where one spouse has a percentage of the other spouse’s/partner’s pension to which they are entitled upon retirement.
This may be a claim against:
a the death benefit entitlement;
b the income received;
c the lump sum element
Pension Sharing
On 1 December 2000 the Welfare Reform and Pensions Act 1999 brought about pension sharing. Pension sharing allows for a percentage of one spouse’s or partner’s pension fund to be transferred into the other spouse’s or partner’s pension fund, resulting in that person having their own pension fund or their existing pension being increased. The benefit of this method over attachment is that the receiving spouse has control over the fund and there are no problems relating to re-marriage of the receiving spouse/partner, or death of the pensioned spouse/partner, as the fund will be in the control of the receiving spouse/partner
Detailed information will be required before we are able to advise you as to the best way forward for you. Advice may be required from an independent financial adviser or a report obtained from a Pensions Actuary.
Pension Changes
State Pension
The State Pension is intended to ensure that everyone has a basic amount of money to support them in their old age. The amount you will receive is based on your National Insurance (NI) record and to receive the full basic State Pension you will need to have 30 years’ worth of contributions.
The State Pension is being reformed from 2016, depending on whether you reach your state pension age before or after 6 April 2016
Pre 6 April 2016 – There are two parts to the state pension, the basic state pension (BSP) and the additional state pension (ASP).
For the purposes of divorce proceedings, it was possible for a valuation to be obtained of the ASP and it could be the subject of a Pension Sharing Order.
Post 5 April 2016 the new State Pension will be a single tier or flat rate system providing a maximum pension in the region of £151 per week.
To qualify for BSP at least one of the following must apply to you:
a You paid NI contributions;
b You have claimed NI credits;
c You have a spouse or civil partner whose NI contributions cover you for benefits
If you have less than 30 years’ credit you will receive a lower BSP, but only need one year to qualify for some BSP.
ASP is based on your NI record and your level of earnings as an employee.
To qualify for the new State Pension you need at least 10 qualifying years of NI contribution and at least 35 years to get the full State Pension – a proportionate amount will be paid for qualifying years between these dates
Non State Pensions
From 6 April 2015 you have been able to take as much or as little from your defined contribution pension from age 55. Apart from the tax free cash element of the pension fund (usually 25%) any funds withdrawn will be added to your income and taxed accordingly depending upon which tax band you fall into.
The above changes may have an impact upon how assets are divided between spouse’s/partner’s in that capital which was not previously available to one or both spouse’s/partner’s may now be available to provide for such things as a deposit on a house.
It is often appropriate to take advice from an Independent Financial Adviser as to the repercussions of taking an additional sum and in particular the tax implications of doing so before proceeding
The law relating to pensions is complex and we suggest that you seek advice from us before any financial agreement is reached.
Published on web site – May 2015
Disclaimer
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)