From the expert mediators at Online Mediation
This essential guide to pensions on divorce will help you to:
Confidently plan your pension needs
Know your rights and options
Negotiate a fair outcome that is legally sound
Know where to go for help and support
This guide helps those going through divorce or ending a civil partnership; the law for unmarried couples is different (contact us for guidance).
This guide has five sections:
1: Pensions on divorce: what you'll need
How much income will you need after you stop working? This section will give you pointers of how to consider this essential question.
Many of our clients find it helpful to complete a budget, listing their expected spending when they retire. Some spending may be similar to your current level, but some may change. Below is one example of a budget sheet from the service 'Money Helper'.
Another approach is to use your current income as a benchmark. In this example from Standard Life, they estimate that to continue your current lifestyle in retirement you would need around 50% of your current income. And for a more prosperous lifestyle this goes up to 60%.
This approach is quick to work out and a helpful initial guide, but of course may need fine-tuning.
A different approach comes from the Retirement Living Standards, who give a yearly income figure of £31,300 to fund a 'moderate' retirement lifestyle. The 'minimum' income is £14,400 and a 'comfortable' income is put at £43,100.
Links to these resources are at the end of this guide.
These approaches may seem daunting and varied. But the essential point is to give the question of what you will need in retirement careful attention. During mediation, an expert mediator will help you consider your aims with your specific situation and needs in mind.
2: How to achieve your pension on divorce aimsÂ
Next, it’s essential to figure out if you’re on track to meet your retirement needs after divorce, or if adjustments are needed. Â
First, you’ll both need to both take stock of what pensions you have. Â
It can be forgotten, but your State Pension is a valuable part of the picture. Finding out what you will receive, and at what age, is usually straightforward. The Gov website allows you to obtain all the information in a few minutes (there is a link at the end of this guide). Â
The amount of State Pension you’re paid goes up depending on how many qualifying years of National Insurance contributions you have. It’s essential to find out how many further years of N.I. contributions you’ll need to reach your full entitlement. Â
Alongside the State Pension, you probably have other pensions. These might be pensions set up by your employer, or that you have set up yourself. Some of the biggest names in pension are Aviva, Legal & General, and Scottish Widows, but there are many providers. Both you and your (ex) spouse will need to list all of these pensions and contact the providers to find out how much it is worth. You or your (ex) spouse might have other pension schemes from working in local government, the civil service, the armed forces, or the NHS.  It's worth checking carefully as it's vital each and every pension is listed.
We recommend contacting your pension provider promptly, asking for a valuation for divorce purposes. Public sector pensions provided by the NHS, uniformed services, civil service and teachers pensions can take months to provide you the information you need. It’s important to be asking for the right information, so expert help, for example from a mediator experienced in dealing in finances, can save time here. Â
Gathering your pension information is part of what is called ‘Financial Disclosure’. It’s a legal requirement for you and your (ex) spouse to share all information on your finances with each other in a full and transparent way.Â
Although we are focussing on pensions on divorce in this guide, you will need to gather and share information on all your other ‘assets’ (things of financial value) and debts. A mediator experienced in sorting finances on divorce can assist you to complete the disclosure process properly and legally. Â
So, you have a sense of your pension needs, and you have gathered and shared information on your current pension situation. Can you both meet your needs in retirement? Do either of you have a gap between what you have and what you need? Â
The best options to meet your pension needs will be specific to your situation. It will often involve a range of actions. Some commonly considered options are:
Boost a pension pot with further contributions between now and retirementÂ
Ensuring you’re on track to receive the full State PensionÂ
Sharing out existing pension pots to meet needs
Looking at other potential sources of income in retirement
Expert help to consider what options are appropriate can be crucial here. A mediator experienced in finances can assist you both to explore your options.
The charity Advice Now have produced a helpful short video on Pensions on Divorce:
3: How to reach an agreement about pensions on divorce
Careful consideration of pensions on divorce is crucial to securing a fair financial settlement. There are broadly three approaches taken to pensions on divorce:Â
With some expert guidance along the way, a divorcing couple discuss their options and come to an agreement. Often called the ‘DIY’ route. Some expert input is usually obtained, especially around pensions. Â
Assisted negotiations. Where communication is difficult, or has stopped completely, an independent professional assists. A mediator with expertise in dealing with finances on divorce can assist with communicating and negotiating, and also guide through the practicalities. Â
Litigation - ‘fighting it out in court’. Getting a team of lawyers each, who will compete in court for (on average) 1.6 years, to try to convince a judge they are right. This is often called a ‘loose - loose’ scenario, because the teams of lawyers can eat up £40,000 of your joint resources (often much more). For those with moderate incomes and assets, this is usually more than the sums being debated, and can leave everyone worse-off.Â
All the mediators at Online Mediation are adept in assisting with options 1 and 2. If you are completing your DIY negotiations and need some expert guidance, or you require full mediation to communicate and negotiate a fair settlement, we can assist. If you are contemplating option 3, the court usually requires you to meet with a mediator before starting litigation.
Feel free to get in touch to see how a mediator can assist. Â
4: Checklist for dealing with pensions on divorce
When sorting pensions on divorce, it's important to consider:
Plans for retirement: consider your needs
Take stock: see if you are you on track to meet your aims
Get valuations: list all pensions and ask for a valuation for divorce
Consider your options: there are options including pension sharing
Negotiate fairly: get expert help to complete financial disclosure and negotiate fairly
Implement your agreement legally: ensure you put your agreement into practice properly and legally
Every person's situation is unique, so what is appropriate in your circumstances will need to be assessed. If you're unsure, book an individual assessment meeting with a mediator, where they can provide bespoke guidance based on your full circumstances and needs.
5: Pensions on divorce: links and resources
There are many excellent free resources available online. Our friends at the charity Advice Now have written an excellent and thorough guide, available here:
Free assistance is available from Money Helper, including their retirement budgeting tool:
There are many pension calculators available online with a simple search; here is Standard Life's:
The Retirement Living Standards website:
You can find State Pension information here:
Retirement age: https://www.gov.uk/state-pension-age
State Pension forecast: https://www.gov.uk/check-state-pension
The official website of the NHS Pension scheme:
Information on benefits and other resources available in retirement from the charity Turn2Us:
Book an individual meeting with one of our expert mediators here:
Do get in touch with any questions:
While every effort has been made to keep this information up-to-date, pensions on divorce is a complex topic subject to regular legal and other changes. This general information should not be relied on solely and expert individual guidance should be obtained.