How pensions are assessed during a separation, divorce and dissolution

When you end your marriage (or civil partnership) by judicial separation, divorce or dissolution or certain cohabitations, the court can decide to divide your assets with your former partner (for their benefit or for the benefit of any dependent children). This is to make sure that each person is provided for.

If you or your spouse, civil partner, qualified cohabitant have been in a pension arrangement for some time, pensions could be a very significant part of your family assets. While the family home is usually the most valuable asset, your pension can also be considered an asset. This means the court can order that your pension be divided into whatever shares it considers appropriate. This decision and instruction from the court is called a pension adjustment order.

Pension rights cannot be shared out without a court order – a separation agreement cannot share out pension rights. A judicial separation, divorce or dissolution or an application for redress following the ending of a cohabitation is necessary to get a pension adjustment order.

A pension adjustment order will not be made if the applying former spouse or civil partner has married or remarried.

The law on pension adjustment orders is set out in the:

• Family Law Act 1995
• Family Law (Divorce) Act 1996
• Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010

A pension adjustment order is when the court orders your pension be shared with your former spouse or civil partner or qualified cohabitant.

For example, if one person has a substantial pension, and the other person who worked in the home has no pension, the court can order that part of the pension be paid to the other person (or for the benefit of a dependent child).

The pension adjustment order directs the pension scheme trustees or administrator to pay a portion of pension benefits to the non-member spouse or to another person for the benefit of a dependant.

The Court decides the level of benefit to be made to the non-member spouse and this is worked out by calculating a ‘relevant period’ and the ‘relevant percentage’.

• Relevant period - this is the period during which the benefits were earned, that is the start date to end date (it cannot extend beyond the date of the decree of divorce or separation).
• Relevant percentage - this is the percentage of the benefit to be taken into account that is earned during the relevant period. The court can also order that part of the pension fund is split and placed into another pension fund in the name of the other spouse or civil partner so that the non-member has benefits that are completely separate.

If there are multiple private pension arrangements, the court will make separate pension adjustment orders, as required.

Types of pension adjustment orders

A pension scheme can cover different types of benefits. For the purposes of pension adjustment orders, these benefits are broken into:

• Contingent benefits - death in service benefits under a pension scheme
• Retirement benefits - all other benefits payable under a pension scheme

A pension scheme member may be eligible for one or both types of benefits. Each type of benefit must be applied for separately under different pension adjustment orders.

A pension adjustment order on contingent benefits can only be made up to a year after a divorce or legal separation has been granted and the pension adjustment order ends if the member spouse leaves the relevant employment. A pension adjustment order on retirement benefits can be made at any time.

Pension adjustment orders can also apply to cohabitants, but the rules are slightly different.

A court can make a pension adjustment order if a cohabitation ends (this means a cohabiting couple are no longer in a relationship). However, unlike in the case of separation, divorce or dissolution, the pension adjustment order can only be made in respect of a qualified cohabitant, not any dependent children. In addition, the rules of the pension scheme must expressly allow for a non-member qualified cohabitant to apply for a pension adjustment order in respect of a contingent benefit.

A cohabiting couple is a couple that lives together in an intimate and committed relationship, who are not married to each other and not in a civil partnership. Cohabiting couples have certain rights in relation to property, custody of children, maintenance and inheritance. To qualify for these rights, you must have been cohabiting for at least 5 years (or 2 years if you have dependent children together).

Cohabiting couples can be opposite-sex or same-sex. A cohabiting relationship can continue to be ‘intimate’ even if it is not sexual.

Before a court grants a judicial separation, divorce, dissolution, each spouse (or civil partner) should have fully revealed all of the financial resources to the other person. This includes full details of any pension.

The court will consider all of the financial resources available to each person before it makes a pension adjustment order.

Even if the court does not make a pension adjustment order, it may take the value of the pension into account when making other financial orders.

If legal proceedings have started, each spouse, civil partner, qualified cohabitant must give the details of their property and income to the other spouse, civil partner, qualified cohabitant (or to a person representing any dependent children). Property and income include rights acquired under a pension scheme.

With the agreement of the member spouse, civil partner, or qualified cohabitant, the trustees should, if possible, provide the information voluntarily to avoid the expense of obtaining a court order. If this is not possible, the court may direct pension scheme trustees to provide more specific information in relation to pension benefits. The trustees must provide the information within the period specified by the court.

This is set out in the Pensions Act 1990.

When a pension adjustment order is granted by a court, it is served on the trustees of the spouse's pension scheme. The trustees will then make the necessary adjustments to the provisions of the scheme.

Pension schemes are administered by trustees who must follow the terms set out in the trust deed and rules without a court order. The trustees cannot change the terms of the trust and make provision for a person who is outside the scope of the scheme, even if the member requests them to do so.

For example, the terms of a trust could make provision for a member's spouse (such as a survivor's pension), and this will be payable to the member's lawful spouse, even though the member may have been separated for many years and have a new partner.

The terms in a separation agreement in relation to pensions may not be enforceable against the trustees or legally binding.

Pensions are particularly complex, so you should seek specialist advice in relation to the value of a pension. Find more information on pensions.

The court can make a pension adjustment order when it is granting a decree of judicial separation, divorce or dissolution.

Alternatively, either spouse can apply to the court for a pension adjustment order after the decree of judicial separation, divorce or dissolution has been granted.

The Pensions Authority is responsible for regulating pension schemes. You can visit their website for information on how pensions may be affected by separation or divorce. The Pensions Authority has also published A brief guide to the pension provisions of the Family Law Acts (pdf) and the Pensions on separation and divorce checklist (pdf).