Pension Sharing on Divorce in Scotland
Pension Sharing on Divorce in Scotland
Divorce can be a stressful and complicated process, particularly when it comes to dividing assets. One important aspect often overlooked is how pensions are shared. Understanding how pensions are dealt with during a divorce in Scotland can help ensure a fair outcome for both parties.
What is Pension Sharing?
Pension sharing is a legal mechanism used to divide pension assets between divorcing spouses or civil partners. It allows a portion of one party’s pension to be transferred to the other, providing a clear and final financial separation.
How Pensions are Valued in a Divorce
In Scotland, pensions are considered matrimonial property if they were built up during the marriage or civil partnership. The starting point for valuing a pension is the Cash Equivalent Transfer Value (CETV), which represents the lump sum value of the pension fund between the date of marriage and the date of separation or “relevant date”. Only the value accrued during the marriage is taken into account. Different rules apply where the pension is already in payment in which case the starting point is a Pension Equivalent Transfer Value (PETV).
Pension Sharing Options
There are three primary ways pensions can be dealt with in a Scottish divorce:
- Pension Sharing Order: This involves a court order transferring a percentage of one spouse’s pension to the other. The receiving spouse can transfer this to their own pension scheme or start a new one.
- Pension Offsetting: One party may keep their pension in full while the other receives a larger share of other assets, such as property or savings.
- Pension Earmarking (Rare in Scotland): This allows a portion of the pension benefits to be paid directly to the ex-spouse when the pension becomes payable. This option is less common due to its complexity and lack of a clean break.
Legal Process for Pension Sharing
- Disclosure of Assets: Both parties must fully disclose their financial assets, including pensions.
- Valuation of Pension: The pension provider will supply a CETV. For complex pensions, an actuary may be required to provide a more detailed valuation, especially where the pension is in payment and a PETV is required to be obtained.
- Agreement or Court Order: Pension sharing can be agreed upon by both parties as part of a financial settlement or imposed by the court if agreement cannot be reached.
- Implementation: Once a pension sharing order is granted, the pension provider has a legal obligation to implement the transfer.
Factors Affecting Pension Sharing
- Length of the Marriage: Only pension contributions or growth during the marriage are considered.
- Type of Pension: Private pensions, workplace pensions, and public sector pensions may be treated differently.
- Fairness: The court aims for a fair distribution, but this does not always mean a 50/50 split.
Importance of Legal Advice
Pension sharing is a complex area of law, and the financial consequences can be significant. Seeking legal advice ensures that:
- All pensions are properly valued and disclosed.
- The settlement is fair and legally binding.
- Your future financial security is protected.
Conclusion
Pensions can be a substantial part of matrimonial property in a divorce and should not be overlooked when negotiating a financial settlement. Understanding how pension sharing works in Scotland can help both parties reach a fair agreement. Consulting a solicitor with experience in family law can provide valuable guidance and help safeguard your financial future.
If you are looking for an experienced solicitor, would like to discuss matters or gain a greater understanding of any element of the process then please contact our experienced Family Law Team on 01324 622 888 or contact help@randa-fa.co.uk and we would be delighted to assist.