Pension Sharing Orders In Divorce

July saw the publication of the Nuffield funded study ‘Pensions on Divorce’ by the Pension Advisory Group (PAG), which identified widespread lack of confidence amongst practitioners when it came to the issue of pensions during a divorce. 

Usually, after a matrimonial home, pensions are of the greatest value in a divorce, however out of the 369 court files from divorce cases reviewed in the study, 80% revealed at least one relevant pension, however only 14% of the cases contained a pension order.

A commonly practised way of dividing pensions in a divorce was by offsetting against other capital assets, quite often this would be the matrimonial home.  This practice however is not recommended by PAG, in fact they strongly warn against it, especially with the overwhelming amount of negligence cases against solicitors for incorrect calculations.  Only in cases where there is no other option than to offset, a single joint expert suitably qualified to report as to pensions, otherwise known as a Pension on Divorce Expert (PODE) should be instructed.

Another option regularly taken by solicitors in divorce cases, is apportionment, whereby a portion of the pension is ‘ring-fenced’ due to being accumulated outside of the marriage.  PAG makes it clear that this option is ‘rarely appropriate’ and there may only be justification when ‘the assets exceed the needs’.  Again, a PODE should be instructed in these cases.

With the attention in recent years, being brought by national newspapers to pension sharing orders with headlines such as ‘Getting Divorced? Go after his pension’ there will inevitably be more clients making enquiries as to where they stand with their partner’s pension.  The PAG report looks to bring ‘guidance to family judges, lawyers and pension experts to encourage fairer settlements’.  Another aim is to ‘help manage liability for solicitors’.

Should a previous client feel they did not receive a fair settlement, it would not take much for them to come across the plethora of solicitor firms advertising lawyer negligence claims.  As with PPI claims, could this be the next compensation target?  With previously no clear guidelines, and pension values regularly valued less than their true worth, it is not surprising that cases of professional negligence raising from divorce are increasing.

It is important in all cases that solicitors investigate spouses’ assets adequately, advise as to a fair settlement and take specialist advise from a PODE to consider the full extent of a pension entitlement.  Solicitors who do not update their working practises do so at a risk of future professional negligence claims.  PAG has set out a checklist of the minimum amount of pension information necessary for every case as well as produce a useful guide that no solicitor should ignore.

The PAG’s Legal Issues: Draft Guidance for Consultation is available to read here.