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Warners Solicitors provide advice on a range

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of legal matters to individuals , families

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and businesses . The leading legal

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directories regularly recognize Warners

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as offering some of the best legal advice

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in the region . This series of podcasts

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will give you an insight into some of

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the legal issues that may affect you and

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your family .

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A very warm welcome to another podcast

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episode with Warners Solicitors

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, and today I'm with Charles

0:34

Tennant . Charles is a partner

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with Warners Solicitors and specializes

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in family law , and today we're

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going to be focusing on pensions and divorce

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. Now , when a couple divorces or

0:46

dissolves their civil partnership , pensions

0:48

might be the last thing on their mind . However

0:51

, your pension could be one of your

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or your partner's most valuable assets , so

0:56

it's imperative to consider pensions when

0:58

you're working out how to split your finances

1:01

. So , charles , how

1:03

will my pension be divided

1:05

in these situations ?

1:07

For there are effectively

1:09

three options that

1:11

are available in

1:13

the divorce situation . The

1:16

two most likely are

1:19

what's called pension sharing

1:21

or pension offsetting

1:23

, and then there's a third , very

1:26

unusual option called

1:28

pension attachment . So

1:30

if we talk about pension sharing

1:33

, firstly , pension sharing is

1:35

actually relatively new . It's only

1:37

been in place for approximately

1:39

20 odd years and

1:42

in the event of pension sharing

1:44

, what happens is that if , for example

1:46

, one person has a pension

1:48

fund that sets worth £100,000

1:51

and that's shared equally

1:53

, then half that fund

1:55

is sent off

1:57

to the other person and they have their own , completely

1:59

separate pension which they can

2:01

then choose to invest , subject

2:04

to the rules , with their own pension provider

2:06

. Potentially and certainly they can choose on

2:08

when they draw down and

2:10

how they draw down , whether they take a

2:12

lump sum or whether they take an

2:14

annuity , etc . Etc . So

2:16

that's pension sharing and

2:18

that's often the

2:21

fairest way and the most

2:23

precise way of dividing

2:25

pensions . The other option

2:27

that one sees very often is what's called pension

2:30

offsetting . Now , that's where

2:32

actually the pensions are left alone

2:34

and , instead of them

2:36

being formally divided by way of a

2:38

pension sharing order , what

2:40

happens is that actually one

2:43

person says I'm going to hang on to

2:45

my pension and then the other person

2:47

says , okay , well , i need to have some extra

2:49

cash , some extra capital to

2:51

make up for it . Now there's a real difficulty

2:54

with pension offsetting , which is that it's an

2:56

imprecise science . In fact , i'm

2:58

not convinced it's a science at all . It's

3:00

probably more an art . And indeed , a

3:02

few years ago there was a very interesting

3:05

academic article . I

3:07

won't bore you with the details of it , but what's

3:09

interesting is what the title of the article was

3:11

. The title of the article is pensions

3:13

and apples and apples

3:15

, or apples and pears . The real key point is

3:17

this is that if one person has one pension

3:20

and it might appear to be worth , for example

3:22

, 100,000 pounds , and another person has a

3:24

completely different pension with a completely different provider

3:26

, and on paper that's also worth 100,000

3:28

pounds , you might think simplistically

3:31

oh , that's fine , everyone's got the same pension

3:33

. But if it later turned out that actually one of those

3:35

pensions was what we call the defined benefit pension

3:38

scheme , otherwise known as a final salary pension

3:40

scheme , and the other one was what we call the defined

3:42

contribution scheme or a money purchase

3:45

scheme , actually they're very different funds

3:48

And the likelihood is this

3:50

is only a likelihood rather than the search team the likelihood

3:52

is the person who left that arrangement

3:55

with the defined benefit or the final salary

3:57

schemes actually probably got a much , much

3:59

better outcome , because

4:01

what you tend to find is

4:03

that the income that

4:06

is generated , the value of that

4:08

pension , is much greater than it would

4:10

be if it was an equivalent money purchase

4:12

or defined contribution scheme . So

4:14

that's pension offsetting very complicated

4:16

, not easy , but well

4:19

liked because it's simple And because

4:21

often what we find is that

4:23

certain individuals want to hang

4:25

on to their pensions and certain individuals

4:28

are not so worried about pensions

4:30

and perhaps more interested in hanging on to

4:32

capital , for example , being able

4:34

to hang on to the family home . I spoke very

4:36

briefly and I'm not going to say a great deal about pension

4:39

attachment . That's very unusual

4:42

. Now , the reason it's unusual

4:44

is because if you have what's called a pension

4:46

attachment order , then

4:48

The pension attachment order

4:50

dies with the pensioner

4:53

. For example , if there's a pension attachment

4:55

order from one individual to the other

4:57

and the person with the benefit

4:59

of the order continues

5:02

to live but the payer dies , then

5:04

the pension dies with them . So actually

5:06

not something that many people should

5:08

be keen to go down that route

5:10

for the obvious reasons . So not

5:12

something we see at all regularly

5:15

.

5:15

Now , So in essence , will I have

5:17

to split my pension 50-50

5:19

?

5:19

Potentially yes , but absolutely

5:22

probably not . It's very

5:24

much more complicated than that . Firstly , of course , you've got

5:27

to establish what pensions each

5:29

person has , and obviously

5:31

what doesn't tend to happen is that one person

5:33

has all the pensions or one person has a

5:35

precise percentage . Then you've

5:38

got to establish , as I just explained earlier

5:40

, what the real value of those pensions

5:43

is and , as briefly

5:45

mentioned earlier , the difficulty is that the what's called

5:47

the transfer value , or the capital

5:49

value that's used for divorce

5:51

purposes , is not

5:54

always a reliable indicator

5:56

of the true value of the pension . But

5:59

certainly after a

6:01

long marriage , then

6:03

there is a strong likelihood

6:06

that pensions are going to be shared

6:08

broadly equally Whether or not it's absolutely

6:11

50-50 is by no means certain but certainly

6:13

broadly equally .

6:14

And if I've built up a large pension pot

6:16

before I got married , do

6:18

I have to split the total value of my pension

6:21

with my ex-partner ?

6:22

That's a really contentious issue And

6:25

the relatively recent case

6:27

law is that if

6:29

, for example and I'm probably with family law

6:32

, is that examples the devil's in

6:34

the detail . But if , for example , if you had

6:36

someone who contributed their pension for , say , 30

6:38

years and for the first

6:40

15 years they were not married

6:42

, but for the second 15 years they were

6:44

. In that sort of scenario

6:47

, there's a really big risk

6:49

that , yes , they would end up having to share

6:52

half the entire pension

6:54

, including all those contributions

6:56

made prior to the

6:58

marriage . If you take a different

7:00

scenario , a much shorter marriage

7:03

, perhaps you contributed to your pension for

7:05

10 years and then you're only

7:08

married for two or three years , so when you get divorced

7:10

you're in your early 40s . In

7:12

that scenario you might

7:14

avoid a pension sharing order altogether . But certainly

7:17

if you're talking about a marriage of any

7:19

sort of reasonable duration , so

7:21

probably eight , 10 years or longer

7:23

, and if you're talking about a marriage that's generated

7:26

children , where you've had a family , then

7:28

you are looking very much at the

7:30

risk of having to share your entire pension , irrelevant

7:33

of when you contributed to it .

7:34

Thank you for that , Charles . Now

7:36

I don't have a workplace

7:38

pension , for example , or a private

7:41

pension . Will I have to split my

7:43

state pension , The ?

7:45

simple answer is probably not no . In

7:47

theory , there is something called an additional state pension

7:49

and theoretically

7:51

that could be subject to

7:53

a pension sharing order . But that's

7:55

actually very unusual . So no , nine

7:58

times F10 , you hang on to your state

8:00

pension entirely .

8:02

I'm sure that's very good news to some people

8:04

. Now my partner has a final salary

8:07

pension . Will I get half

8:09

of the current face value ?

8:11

So this goes back to the point I was talking

8:13

about earlier , which is this issue of what

8:15

a pension is really worth . And

8:18

the answer is no , you probably won't get half

8:20

the face value . You may actually get half

8:22

of a greater value . The difficulty

8:24

is that the final salary , these defined

8:26

pension schemes , the

8:29

transfer value , the capital value that's

8:31

used for divorce purposes is often not

8:33

always , but it's often an undervalue

8:35

. So actually the

8:37

possibility is in that scenario

8:40

that you get a pension share that's greater

8:42

than half the current face value

8:44

. And this really comes to the key point about pensions

8:46

, which is that pensions are enormously

8:48

complex . Different schemes

8:51

operate in different manners , they

8:53

have different administrators and

8:55

it's a grave error

8:58

, either as an individual

9:00

or as a solicitor , to believe

9:02

that you are a pensions expert . If

9:04

there are large pensions , then

9:07

it is nearly always going to be

9:09

the right decision to get some

9:11

pensions advice . Initially you might be

9:13

able to get that from a pension's

9:16

IFA , but subject

9:18

to the initial comments they make

9:20

, their preliminary reviews , you might often

9:23

in many cases certainly for example , if there was a

9:25

defined benefit or final salary scheme

9:28

in that sort of scenario probably

9:30

going to meet what's called a pension sharing report

9:32

. That's probably going to have to be prepared

9:35

by some form of pension actuary

9:37

or other pension expert . The

9:39

truth is that it's a big

9:41

risk for you , the individual

9:43

, or your lawyer , to try

9:46

and decide what

9:48

is fair when it comes to pensions without

9:50

that expert advice and guidance

9:52

.

9:53

Charles , thank you for covering those points . As you

9:55

say , this is a very complex

9:57

area of law . If people want

9:59

to get in touch with you directly , how can they do

10:02

that at Warners ?

10:03

There are a number of ways . Obviously they can contact

10:05

us by email or telephone

10:07

and via our website

10:10

, obviously more than welcome to

10:12

pop into the office and make

10:15

an appointment via reception .

10:16

Do you want to give your direct email address ?

10:19

Yes , absolutely . My email address is

10:21

ctenant , which is T-E-N-N-A-N-T

10:25

at Warners W-A-R-N-E-R-S

10:28

dot law .

10:30

Thank you for your time today , charles . I've

10:32

been talking to Charles Tennant , who

10:35

is a partner with Warners Law . We've

10:37

been talking about pensions and divorce with

10:39

Charles . Do check out the

10:41

other podcasts in this series . You can gain

10:43

extremely good advice from

10:45

the Solicitors at Warners For

10:48

the family team . please arrange a consultation

10:50

with one of the team here at Warners

10:53

Solicitors as soon as it's convenient

10:55

for you . I'm Paul Harvey . Please

10:57

join me next time .

11:00

Thank you for listening to this Warners Solicitors podcast

11:03

. To find out more about our

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expert legal teams and the advice

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and services they deliver for both individuals

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and businesses , please go to

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Warners-Solicitorscouk .