The Danger Of Offsetting The House Against The Pension

At Myerson, we understand that if you are thinking about separating, your immediate concerns will be where you and any children of the family are going to live.

It can be tempting to ignore pensions and agree to take a larger share of the family home to meet your immediate housing needs.

Finances on divorce

When considering finances on divorce or dissolution of a civil partnership, the aim of the court is to achieve fairness between the parties. This applies to pensions as much as the other assets and income of the marriage. 

Pensions are complex and when you are thinking about where you are going to live, thinking about your pensions might be the last thing on your agenda.  

In many cases, after the family home, pensions are likely going to be the most valuable assets of the marriage.

On divorce/dissolution of a civil partnership, there are various ways pensions can be dealt with. Usually, by pension sharing and/or offsetting.

Pension Offsetting

Offsetting is the process by which the right to receive a pension is traded for receiving capital. Offsetting works by adjusting the distribution of the non-pension assets to take into account that one party will have less pension provision and any pension rights will remain with the pension member.

Offsetting is often used in cases where one party wishes to retain a greater share of the family home, at the expense of future pension provision.

It is important to think about what income you will have when you retire, and it is essential that you do not overlook pensions when working out your finances.

Women will often prioritise keeping the family home at the expense of giving up a valuable pension later in life. However, ignoring pensions can leave many people, particularly women, in a worse financial position after divorce.

Pension sharing orders work by telling the providers of a pension fund to transfer a percentage of the transfer value to the party who is going to benefit from the order. This means that it is your own pension and it is not affected by your spouse or civil partner dying or remarrying in the future.

After an exchange of financial disclosure, including cash equivalent values of all pensions, we can assess whether a pension actuary needs to report on pension sharing and/or offsetting. This report can then form the basis of negotiations. If you are in court proceedings, you may be ordered by the court to instruct a pension actuary,  in any event.

Here to help

Pensions should not be overlooked, and you should always seek legal advice at the earliest opportunity. If you require any legal advice on the matter please feel free to contact us using the form below.