Division of Pensions in Ancillary Relief Proceedings
Often not initially considered by parties to be a matrimonial asset, pensions can be amongst the most valuable assets within the matrimonial pot. Governed primarily by the Matrimonial Causes (Northern Ireland) Order 1978, fairness remains the court’s objective when determining the appropriate approach to pensions.
The court will consider the parties’ respective resources; their financial needs, obligations, and responsibilities; the standard of living enjoyed during the marriage; age and health; the parties’ contributions; and the extent of any pension rights that may be lost as a consequence of divorce. The court’s aim is to reach an outcome that is fair, having proper regard for present and future retirement provision.
Methods of Dealing with Pensions
There are three primary mechanisms by which pensions are addressed in ancillary relief proceedings:
Pension Sharing Order
Pension Attachment
Offsetting.
The most suitable method will turn on the facts of the case, the nature of the schemes in question, the parties’ respective needs, and the overall strategy for achieving a fair division.
A Pension Sharing Order essentially creates a separate pension pot for the receiving party. This is frequently the most direct way to achieve equality in respect of retirement income. Generally worked out on a percentage split with statutory timeframes imposed to ensure implementation of the terms.
A Pension Attachment Order does not create a separate pot and does not achieve a complete financial clean break in respect of pension benefits. This Order directs the pension provider to pay a portion of defined benefits, lump sum payments or death benefits to the former spouse. This is much less common than a Pension Sharing Order as payments typically only commence on retirement of the policyholder. It can also be terminated should the policyholder remarry but can be useful when immediate sharing of the pension pot is not feasible, nor practical.
Offsetting involves attributing present value to the pension and setting that against other non-pension assets, such as equity in the family home, savings, or investments. The party retaining the pension keeps the benefit, while the other is compensated by receiving a larger share of non-pension assets. Offsetting can be attractive where a clean break is desired, and the parties wish to avoid the complexity of sharing arrangements.
The Critical Importance of Accurate Pension Valuation
The accurate valuation of pension rights is fundamental to achieving a fair outcome. This is especially true for public sector defined benefit schemes such as the Civil Service and NHS pension schemes, which are often among the most valuable assets in the case.
The Cash Equivalent Transfer Value (CETV) is typically the starting point for assessing a pension’s value and are routinely obtained from pension providers, providing a common baseline for discussion and disclosure.
However, whilst a CETV is a necessary first step, it is not usually sufficient on its own to inform fair sharing or offsetting decisions, especially where the pension is substantial, there are multiple schemes, or the case involves defined benefit entitlements.
Given the above, it is often necessary to obtain specialist actuarial advice. An actuary can provide an independent, case-specific analysis that goes beyond the CETV and addresses the practical questions the court must decide.
Practical Considerations and Next Steps
In practice, early information-gathering is essential. Parties should request up-to-date CETVs and full scheme information. Where the pensions are complex, jointly instructing a single actuary is often the most efficient way to obtain independent advice that the court can rely upon. The form of order—whether pension sharing, attachment, or offsetting—should then follow from the expert analysis, the parties’ needs and resources, and the overarching aim of fairness, including a clean break where appropriate.
If this is something that you wish to discuss further, please do not hesitate to contact our Family solicitors in Belfast, Dungannon and Omagh.