image

Options for your Pension

There are now three ways in which the Court can take account of pension rights :

  • Offsetting against other matrimonial assets
  • Pension attachment orders (formerly referred to as "earmarking")
  • Pension sharing orders

Offsetting

  • Simplest method
  • Pension benefits are offset against other matrimonial assets
  • Offers clean break
  • Useful where the pension values are small, the parties have sufficient pension of their own or the priority is for one spouse to keep the matrimonial home

Attachment

  • A Court direction to pay at a later date
  • No legal transfer of ownership
  • No clean break
  • Has not proved popular in practice
  • The scheme member remains liable for Income Tax on the total of the pension benefits
  • Useful where there is a need for continuing lump sum life cover or tax free cash at retirement is needed by the recipient ex-spouse
  • Possible pitfall - control remains with the member

Sharing

  • Legal transfer of ownership
  • Benefits are divided at the time of divorce
  • Clean break
  • New option, directly affects pension

In many cases, off-setting will continue to be the preferred option, though sharing is likely to prove more popular than attaching. If a spouse has more than one pension arrangement, each can be treated differently - i.e. if appropriate, an attachment order could be made against one pension arrangement and a sharing order against another.