Armed Forces Legal Advice

Pension Sharing Orders in practice

An explanation of how the various orders can operate in practice is given below.

50% PENSION SHARING

Advantages – Husband

Disadvantages – Husband

Enables a clean break with no future uncertainty.
Husband accumulates post-divorce benefits from future service at full rate.

The reduction in the husband’s benefits will be made immediately, even though the wife may not immediately receive any benefit.
Pension debit can have the effect of reducing the husband’s pre-divorce benefits by more than the percentage credited to the spouse.

Advantages – Wife

Disadvantages – Wife

Can obtain a separate pension fund for retirement.
Death of husband does not mean loss of pension.
Wife’s remarriage does not affect right to the pension.
Can enable a clean break to be achieved.

Cannot access benefits until aged 65.

(Note; for Court Orders made after 5th April 2009, benefits will be available from age 55).

50% ATTACHMENT

Advantages – Husband

Disadvantages – Husband

If wife remarries she loses right to share of pension income; lump sum element is also variable.

The percentage applies to benefits on leaving the service, therefore wife can receive not only 50% of pre-divorce benefits but also post divorce benefits.

Advantages – Wife

Disadvantages – Wife

Chance to acquire share of gratuity and pension earlier ie when husband retires from service.
Not only does wife receive 50% of pre-divorce benefits but also can receive benefit accumulated after divorce but before retirement.

Loses right to pension income if remarries.
Always open to variation (gratuity) before actual payment; thus no certainty.
Pension income attachment open to variation both prior to retirement and / or once in payment.
Pension dies with husband so wife loses benefits if husband predeceases.

PENSION SET OFF

Advantages – Husband

Disadvantages – Husband

Can preserve pension benefits in full.
Can achieve a clean break.
Can work out a settlement to suit circumstances.

Where value of pension exceeds other capital, his right to that capital can be wiped out, leaving him with no capital to start again

Advantages – Wife

Disadvantages – Wife

Can enable wife to gain greater share of existing capital.
Can work out settlement to suit circumstances.

Wife may accept settlement of capital which is lower than the true long term value of the pension.

Both
Although there can be advantages to both parties it is important that the set off is fair. Both parties should ensure that the CETV is an accurate valuation of the true underlying value of the benefits – an actuaries report may be necessary for this.

For more information contact Chris Upfield or telephone 023 9236 6004.