Pensions Advisory Group guidance published

5th August 2019 Family Law

Pensions can be difficult to deal with upon divorce. First of all, there are many different types with new terminology accruing down the decades: SIPPs, SSASs, stakeholder, s32 buyouts, final salary, AVCs, state second pension, provision from the Pension Protection Fund. Add to this the fact that people often build up pensions throughout their working lives and can end up with interests in multiple schemes, some of which can get forgotten. Pensions, particularly final salary schemes, are subject to constant reform due to the demands placed upon them by increasing life expectancy and changes in financial markets. Since 2015, the available options for taking value out of your pension after 55 have diversified and increased considerably.

There are many different ways to deal with a couple’s combined pension provision on divorce: sharing, attachment, offsetting, using pension freedoms to increase available capital. The rules can be complicated and small errors can make a huge difference. Unfortunately for the legal profession, mistakes around pensions on divorce have become a fertile area for professional negligence litigation. If you have any kind of pension entitlement, it is crucial that you select a lawyer who (1) knows what they’re talking about when it comes to pensions and (2) possibly more importantly, understands the limits of their knowledge and when the time is right to call in a pensions expert.

It is against this background that we welcome the document, A Guide to the Treatment of Pensions on Divorce produced by the Pension Advisory Group, a partnership between judges, academics, solicitors, barristers, actuaries, financial advisors and other experts. It is aimed at the legal profession but we are told that an abbreviated guide for the public is in the pipeline. This will be essential reading for anyone who is working on the area of pensions on divorce and is yet another example of the quiet work continuing within the family justice system to increase levels of expertise and hopefully improve outcomes for separating families.

Our top picks on a first glance at the document:

  • a clear explanation of how the timing of the application for decree absolute can impact upon the implementation of a pension sharing order and how this can affect someone going through divorce if their spouse dies during the process

  • help for making sure all parts of a pension scheme are covered by a court order (e.g. if a worker has an occupational pension which is part-final salary and part-defined contribution

  • guidance on gathering all the necessary evidence from the parties to ensure everything is counted

  • good examples of how cash equivalent values (the standardised way of putting a capital value on a pension pot) can be misleading, particularly in the case of final salary/defined benefit schemes

It is technical. It’s not a page turner. However, there is no better single overview out there for understanding pensions on divorce.

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Hepzi Williams-Arnold is a Solicitor located in Manchesterin our Family department

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