How women can protect their pensions during a divorce
Pensions are incredibly important for your future, so when you divorce, it can be a concern worrying that your pension may not be protected.
During a divorce, the involved parties will need to make decisions concerning how their finances will be split, often only concerning matrimonial assets (assets obtained during the marriage). It can also, in some instances, include non-matrimonial assets (assets acquired prior to the marriage).
There’s no doubt that pensions in divorce settlements are often where concerns arise, with each party wanting to protect their important financial backing for the future. We’re here to show just how you can do this.
In this article, we’re going to discuss how women can protect their pensions during divorce.
What happens to pensions during divorce?
When you divorce, you are required to make decisions concerning the division of assets, and this is done in two ways. You either:
- Agree on the divorce financial settlement between yourselves, and once you come to a decision, have a financial order put in place;
- Or you choose to have assistance from the court who will take into consideration a number of factors.
Factors considered for pensions during a divorce
These factors are set out in section 25 of the Matrimonial Causes Act 1973 and include:
- Each party’s income, including their earning capacity, property, and any other types of financial resources they currently have and are likely to have in the foreseeable future.
- Each party’s financial needs, obligations, and responsibilities currently and are likely to have in the foreseeable future.
- The family’s standard of living enjoyed prior to the divorce.
- Each party’s age.
- Any disabilities, mentally or physically, the parties involved have, including any children in the marriage.
- Each party’s contributions to the family currently and are likely to have in the foreseeable future. This includes looking after the home, children, etc.
- Each party’s conduct.
- The financial needs of any children in the marriage.
How can you protect your pension during marriage?
There are two key ways you can protect your pension during marriage.
1) A prenuptial agreement
A prenuptial agreement is drawn up, at the latest, 28 days prior to the marriage. The agreement will clearly set out who owns each asset and how this will be dealt with in the unfortunate circumstances that you divorce from one another.
2) A postnuptial agreement
A postnuptial agreement is similar to a prenuptial agreement despite it being created once the wedding ceremony has occurred. This can happen at any point during your relationship, and provides the complete same protection as a prenuptial agreement, so long as certain actions are taken when drawing up the agreement.
These actions include that:
- Each party should disclose their full financial circumstances.
- Each party should enter the agreement freely without any pressure.
- Each party should take independent legal advice.
For more information concerning pre and postnuptial agreements, take a look at EQUIFAX.
How can you safeguard your pension during a divorce?
So how can you safeguard your pension during a divorce? Here are two ways.
1) A financial settlement order
When you divorce, you and your ex-spouse will be required to make a divorce financial settlement agreement. For instances where you are able to amicably make the decision between yourselves via private negotiation or mediation, you will additionally need a financial settlement order.
A financial settlement order is the only way you can safeguard your finances during divorce. This is due to the Final Order during divorce not separating your assets automatically, meaning claims can be made further down the line. The order will cut all financial ties you have to one another.
2) Pension offsetting
Pension offsetting is often a way many people prevent their pension from being affected during divorce. It provides a clean break, which is ideal for those who don’t have children and wish to go their separate ways.
What pension offsetting basically mean is to offset a different asset of similar value in order for you to keep your pension. This could be the family home in exchange for keeping your pension.