Offsetting pensions after divorce or separation
One area of family law which has recently come to prominence has been the splitting of pensions.
After divorce or separation it may be necessary to reach agreements on how to divide financial assets, which may include future or current pensions.
As part of a financial dispute resolution, family court decision/order or family mediation agreement can involve what is known as “offsetting pensions.”
One way of fairly splitting pension assets is by way of what is known as offsetting, where one person keeps their pension in full, whilst the other retains another asset. In most cases this would be the place of residence.
In short, one person keeps the home, the other keeps their future to current pension in full.
As you can imagine, equating the two can be tricky. This can also be complicated by contextual factors, such as not owning the family home, children arrangements and the current and future needs of each person.
Each case is considered on an individual basis by the judge or arbitrator, there is not a set decision for all cases. It can be difficult comparing or equating the value of an individual’s pension with other assets to deliver a fair settlement.
The Pension Advisory Group, a set of legal experts tasked with investigating how to treat pensions fairly upon divorce, has noted that there is not a set standard for all cases and document examples where fair solutions can be reached.
The April 2020 report from the PAG can be accessed in full here on The Nuffield Foundation website.