retirement

Pension Sharing History

Before 1973 there was no requirement on the courts to consider any sharing of built up pension benefits for divorcing couples.

Matrimonial Causes Act (1973) - Pensions are taken into account

This gave the courts powers, in England and Wales, to take into account the values of any private pensions when structuring a financial settlement for divorce - although they did not have to do so. The pension monies could still not be taken away from the member. A similar law was passed in Northern Ireland in the Matrimonial Causes (Northern Ireland) Order 1978.

Scotland 1985 - The Family Law (Scotland) Act (1985)

The law defined a pension as now being part of "matrimonial property" i.e. the assets within the marriage. Meaning that a pension should be included in the overall value of the matrimonial property and be divided up accordingly. Therefore, in Scotland the value of the pension had to be taken into account.

Generally speaking at this point for all areas of the UK, the person with the highest pension value retained it and took a smaller share of the remaining assets from within the marriage.

This is generally known as 'offsetting'.

Pensions Act (1995) - Earmarking

For divorce applications made after 1 July 1996, the courts were given the power earmark (literally reserve) part a persons pension benefits on behalf of another. There was still the option of offsetting other assets against the value of the pension as above, however, if agreement could not be reached, the courts had the power to issue an earmarking order to reserve some or all of a persons pension benefits for an ex-spouse. More on earmarking

Welfare Reform and Pensions Act (1999) - Pensions Being Shared (i.e. separated into two pensions)

There were some slight changes in law made by the Family Law Act (1996) and this has now been superseded by the Welfare Reform and Pensions Act. This act now provides a third option for couples who commence divorce proceedings on or after 1 December 2000. If agreement cannot be reached by normal means the courts now have the power to issue an order, have the pension valued and then separated into two parts. One pension for the member and one for the ex-spouse. The shared pension rights can be invested into a separate policy in the individuals own name. More on Pension Sharing.