New Guidance on the Treatment of Pensions in Divorce

On 01 July 2019 the Pension Advisory Group published its report providing guidance on the treatment of pensions in divorce. The Pension Advisory Group ( PAG) is a multi-disciplinary group of professionals specialising in financial remedies and pensions on divorce jointly chaired by Mr Justice Francis and His Honour Judge Edward Hess and supported by the President of the Family Division and the Family Justice Council.

The ability of the court to make a pension sharing order in divorce has existed since 2000, despite this there has been a lack of clear guidance to assist in how to treat what can often be one the largest assets in a marriage. Dealing correctly with pensions on divorce is one of the most complex aspects in family cases. 

The PAG report aims to provide this guidance and improve understanding and best practice for family practitioners. The report addresses some of the following areas:

- The fundamental difference between Defined Contribution (Money Purchase) schemes and Defined Benefit (Final Salary) Schemes

For example:

Wife aged 60 has a public sector pension CEV of £300,000

Husband aged 60 has a Scottish Widows pension CEV of £300,000

- Equality?

In practice the Wife will have a pension of £12,800 pa, plus a lump sum of £38,400, plus a widowers pension of £6,400.

The Husband may be able to secure an index linked pension of £7,800 pa with no lump sum, or pension of £6,809 pa with a lump sum of £38,400.

- How to value pensions for offsetting purposes

- When to instruct pension experts 

- How to deal with SSAS ( Small Self-Administered Schemes)

- Taxation of pension benefits on divorce

- State pension on divorce

- The impact of pension freedoms

The PAG report looks set to become a key resource when addressing pension issues in divorce in the overall search for fairness between the parties.

At Hughes Paddison we have a very skilled and experienced matrimonial team. If you need any help or advice in this area then please do not hesitate to contact us.