The pension is often one of the largest assets in the matrimonial pot, and provision for the future can often be a deep concern to separating spouses.
Pension sharing orders have been a very popular way to deal with the pension pot as they apply to divorce proceedings begun on or after 1 December 2000.
However, the pension sharing order is not an option for couples who are applying for a decree of judicial separation.
What happens to the pension if there is a decree of judicial separation?
Those who have a decree of judicial separation do have options when it comes to the pension pot. Pension attachment orders, more commonly referred to as ‘earmarking’ orders apply to proceedings, including judicial separation, commenced by petition on or after 1 July 1996, as per article 4 of the Pensions Act 1995.
A pension attachment order is a court order instructing pension trustees to pay a proportion of their pension to a former/separated spouse when the pension is drawn.
What is the procedure for a pension attachment?
The lawyer dealing with the financial arrangements following your separation will be able to assist with the divorce. Here is an outline of the steps:
- Initiate the application for a pension attachment order by completing the Form A – this is the application you make for financial orders upon separation.
- Request a pension valuation: trustees of a pension scheme will be able to assist in providing a pension valuation. Ordinarily the request is made by the person who has the pension. They should make the request within seven days of notification of a financial hearing. unless they already have a valuation that is less than one year old.
- Serve the pension provider with the application for a pension attachment order.
- The pension provider should complete the Form P which requires the pension provider to provide more information about matters such as ill health and underfunding. Judicial opinion is that the Form P should usually be prepared where a pension order may be made but it is often common for an actuary to be instructed.
- If the pension attachment is being made with consent, and there has been no financial hearing, then the parties must serve a copy of the application for the consent order, along with the draft order and pension attachment annex, and with the requisite information stipulated in the FPR at 9.33. Note that the order may not be made until at least 21 days after service upon the pension provider and not if they have made any objection
- Note that amendments were made to the Welfare Reform and Pensions Act 1999, which require pension attachment orders from 1 December 2000 to be expressed in percentage terms.
Are there any disadvantages to a pension attachment order?
While a pension attachment order can assist in dividing the pension in case of judicial separation, it is worth noting that there are a few disadvantages:
- The court may not attach a pension sharing order to a pension which is already subject to one. This may be an issue if the couples reconcile and/or subsequently divorce.
- They prevent a clean break between the parties, as the non-member receives periodical payments rather than a single sum.
- They are uncertain by their nature, as they are capable of variation. Further, they only become payable once the member has taken his pension – and the court cannot direct the member to retire or to take the pension benefits at any particular time. It would therefore be possible for the member of the pension scheme to delay retirement, which could be to the financial detriment of their separated spouse. Equally, a member of the scheme could opt for early retirement which may reduce the sum of the pension, depending on the scheme rules and by extension, this would reduce the sum for the party to the pension attachment order
- The financial uncertainty is all the greater upon the death of the member, as the pension attachment order on annuities will lapse on the death of the member of the pension scheme.
It is recommended that spouses considering judicial separation take legal advice.