The treatment of public sector pensions on divorce

Public sector pensions

A public sector pension is a unique asset – not only is it a very valuable asset, often more valuable than people realise, but is often partly accrued outside of a marriage which can cause difficulties when looking at it on divorce. Many public sector employees start to build up their pension when they commence employment at 18, yet few people will get married at such a young age. The result is that people on divorce are asking us how they can protect that element of their pension, if at all. The other question we are often faced with is whether you can give up cash, usually equity in a house, in exchange for the pension remaining intact. Both are possible, in the right circumstances. If you are due to get married and have already started to accrue your pension, then it may be possible to protect your some of your pension with a pre-nuptial agreement.

The treatment of pensions on divorce

The treatment of pensions on divorce has been a hot topic recently, not only in family law circles but also with the McCloud judgment resulting in some public sector pensions being re-calculated to address an age discrimination issue.

When it comes to the family court’s treatment of pensions on divorce, the outcome will vary from case to case. Beware of the stories you will hear/read online – the family court has wide ranging powers and can order a variety of outcomes to suit the facts of a particular case. That means that what happens in one person’s case will not be the same as in someone else’s, the outcomes are very fact specific which is why it is vital that proper advice is sought.

Potential issues

The issue of pre-marital pension on divorce can be controversial. The law can enable you to protect that part of your pension, known as ring-fencing, but only if there would still be enough money in the pot for the other spouse’s needs to be met or there is a significant difference in the parties’ ages. It is more likely to be a successful argument if the parties are younger and it is a short marriage or both parties have healthy pensions. The longer the marriage and the older the parties, the more difficult it is to ringfence that part of the pension. It is possible, but it depends on the circumstances of the case. Remember that all pensions are considered, not just the bigger pension.

The same applies to giving up cash in exchange for a pension. This is known as offsetting. Again, this is possible, but requires the input of an expert in pensions and sufficient money in the pot. Together with ring-fencing, this is one of the most popular and also most controversial ways of dealing with a public-sector pension. There are many reasons for and against this method of dealing with pensions on divorce, and proper advice should always be sought before going down that avenue.

Not sharing your pension may be possible, but it is vital that you have proper advice on how to do it and to make sure that in the future you are protected from future claims.