What Happens to Pensions When a Civil Partnership Is Dissolved?

Pensions may represent a substantial part of the wealth built up during a civil partnership.

They should be considered alongside property, savings and other assets rather than treated as separate or irrelevant because they are held in one person’s name.

Understanding pension value

The stated cash equivalent value of a pension does not always reflect the benefits it will ultimately provide.

Different pension arrangements may offer different:

• Retirement ages

• Income guarantees

• Inflation protection

• Survivor benefits

• Lump-sum options

• Investment risks

Specialist pension advice may be appropriate where the pension arrangements are complex or there is a significant difference in retirement provision.

Pension sharing

A pension sharing order divides a specified proportion of one civil partner’s pension rights.

The receiving civil partner generally obtains a separate pension credit in their own name. This can support greater financial independence after dissolution.

Pension offsetting

Pension offsetting allows one person to retain more pension provision while the other receives a greater share of different assets.

For example, one person may retain a larger pension while the other receives more equity from the shared home.

The values should be compared carefully because pension benefits and immediately available capital serve different purposes and may be taxed differently.

Pension attachment

A pension attachment order directs some pension income or a pension lump sum to the former civil partner when the pension holder takes their benefits.

These arrangements are less commonly used because they may not provide the same final separation or certainty as pension sharing.

The appropriate approach will depend on the pension values, each person’s age, retirement plans, housing requirements and overall financial position.

The next part of this series looks at when maintenance may be payable following dissolution.

Elizabeth Stocker can help ensure pension rights are properly identified and considered within the financial settlement and can work alongside pension experts where specialist calculations are required. Book an appointment with Elizabeth or complete the enquiry form.