A pension can be the most important asset a husband or wife can have. It must therefore be taken into account when working out a fair division of marital assets.
The first thing to do therefore when considering a pension it to get it valued. This can usually be done by using the formula laid down in legislation which will calculate what’s called a cash equivalent transfer value (CETV). A CETV is calculated as at the date of separation.
The simplest way of dealing with a pension or pensions is simply to offset them against them the value of other assets e.g. equity in the matrimonial home. It is not uncommon for example for a spouse to keep their pension in return for agreeing to transfer their share of the equity in the matrimonial home to the other spouse.
Another way of dealing with a pension is by way of a pension sharing order made by the court. In this case, it can be ordered that some of the pension rights of one spouse can be transferred to the other who thereby acquires their own pension rights separate from the other spouse. That means the receiving spouse will then acquire a pension of their own, regardless of whether the other spouse dies or retires. It also means the receiving spouse can make their own retirement arrangements and can also nominate who they would like to inherit their pension rights if they die before retiring.
The spouse receiving the new pension may be able to take out a lump sum on retirement on which tax would not be payable. Tax is though payable on income received from the pension after retirement.
It should also be pointed out any new pension can be added to by the recipient spouse so enabling them to build up a larger pension pot.
Another but much less common way of dealing with pension rights is by way of an earmarking order. In this case, the court can order a pension provider to pay a proportion of the death benefit or lump sum on retirement direct to the other spouse. The drawback here is obvious: the recipient spouse has to wait for the other spouse to either die or retire before seeing any payment. Also, since an earmarking order doesn’t apply to pension rights, then if the paying spouse does not take a lump sum on retirement, it will not be possible to implement the earmarking order.
Contact our Family Law Solicitors Glasgow, Scotland for Pensions Advice
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