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There is a misunderstanding that pensions are not part of the joint matrimonial pot when it comes to separating finances on divorce. Statistics show that only around 12% of financial consent orders contain a pension sharing order, whereby the separating couple have made pension provisions as part of their financial settlement.<\/p>\n
There is often a lot of confusion and grey area around pensions. When it comes to divorce, many people don\u2019t even know to consider them as part of their financial negotiations because there is a misunderstanding that they are not a matrimonial asset. However, pensions are often a key part of a separating couple\u2019s financial pot, sometimes the biggest asset a couple has next to the family home and they need to be understood.<\/p>\n
Ciara Pugh<\/a>, Senior Associate, explores the role of the CETV in navigating pensions in divorce.<\/p>\n In order for pensions to be properly negotiated, there needs to be full and frank financial disclosure.<\/p>\n This may be through the completion of the Form E<\/a>, an extensive document going into detail about all financial details, including pension information. The Form E is not mandatory, but it is extremely helpful in understanding each person\u2019s position at the time of divorce. The completed Form E will be supported by evidence such as bank statements, and crucially for some pensions, a CETV.<\/p>\n Download our in-depth guide on how to complete the Form E.<\/a><\/p>\n A CETV is the Cash Equivalent Transfer Value. This is the amount of real cash that the pension scheme offers when a member wants to transfer their pension benefits to another pension plan or an individual retirement account. Generally, these are most relevant for people who have a defined benefit scheme.<\/p>\n Defined benefit (or final salary) schemes could include:<\/p>\n A CETV is an essential part of understanding how much cash is available to divide.<\/p>\n If you are part of a defined benefit, or final salary, scheme, you will require a CETV from your pension scheme administrator. This is so you, your spouse, and the court can understand the value of the pension and if it should be a part of your financial negotiations.<\/p>\n When you have the CETV, the cash value will be incorporated into discussions as part of the matrimonial pot.<\/p>\n Whilst it is possible to get divorced without a CETV, you will not be able to include pensions in your financial settlement<\/a>. This can have serious, long-term consequences on your financial future. You need to ensure you get the document as early as possible as delays to it will mean your divorce could take longer.<\/p>\n The most common way to split a pension in a financial settlement is by a pension sharing order<\/a>. This order is made within a financial consent order<\/a> and means one part is given a share of their ex-spouse\u2019s pension. This share will be transferred out of the giver\u2019s pension into the recipient\u2019s sole pension.<\/p>\n The other option is pension offsetting, where the pension is kept by the original owner and the other spouse gets a greater share in another asset, e.g. the family home.<\/p>\n Read more about how pensions are split in divorce.<\/a><\/p>\n Pensions are an important part of understanding how to divide assets and finances on divorce. A pension order will form a part of your overall financial consent order.<\/p>\n You can legally dissolve your marriage without a financial consent order. However, in doing this, you will leave yourself vulnerable to future financial claims from your ex. For example, in the case of pensions, your ex could stake a claim when you begin drawing from your pension down the line.<\/p>\n Getting a financial consent order which has been approved by the family court will mean your financial ties are legally severed.<\/p>\n Please seek expert family law advice for support with your financial settlement.<\/p>\n A guide to pension sharing orders<\/a><\/p>\n How to trace your pensions<\/a><\/p>\n Divorce and the Gender Pensions Gap<\/a><\/p>\n Is everything split 50\/50 in divorce?<\/a><\/p>\n Stowe How to Handbook: Reviewing your financial disclosure<\/a><\/p>\nUnderstanding pensions in divorce \u2013 the CETV<\/strong><\/h2>\n
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Why would I need a CETV?<\/strong><\/h2>\n
How are pensions split in divorce?<\/strong><\/h2>\n
Importance of a financial settlement<\/strong><\/h2>\n
Useful Links<\/strong><\/h2>\n