Pensions & Divorce

For divorce settlements, the following options are available:-

Pension Offsetting

Where other assets of similar value are substituted for the pension sharing portion ~ this is likely to remain the preferred choice for the majority of couples. For example, one party might have the rights over property and investments while the other, business and pensions.

However, this does not always result in an even balance of assets, especially in cases of long-standing marriages and substantial pension funds, in which case pension sharing may be preferable.

Earmarking

This method simply defers the sharing of pensions until retirement of the pension holder which means that the ex-spouse has absolutely no control and it is up to the member to decide when to take benefits. This also means maintaining ties between the couple rather than a “clean break” so earmarking orders are now relatively rare, but may still be used in certain circumstances.

Pension Sharing

Pension sharing allows the pension arrangements on divorce to be divided completely on divorce, creating a “clean break” between the parties so is usually the preferred option.
A portion of the member’s pension fund is allocated to the ex-spouse, as her/his own pension fund known as a “pension credit.” 

Pension sharing does not necessarily mean a 50/50 split but it is often the starting point.