Pensions and divorce
When good things come to an end, the least one can hope for is a clean ending. For those untying the marital knot after 1 December 2000, there is at least one loose end that has been put in order - the area of pension splitting.
Prior to this, there were two options, often resulting in inadequate provision for the equal distribution of pension benefits between ex-spouses:
- Offsetting - the preferred method of coming to an out of court settlement for all matrimonial assets including pensions. It provided a rough but hopefully fair means to split the assets equally. For example, one party might have the rights over property and investments while the other, business and pensions. Contributions into the pension could then continue independent of one another. This did not always result in an even balance of assets however, especially in cases of long-standing marriages and substantial pension funds.
- Earmarking - this way simply deferred the sharing of pensions until retirement of the pension holder and the percentage earmarked for the ex-spouse was left to the judge's discretion. This meant maintaining ties between the couple even after the divorce and benefits due to the ex-spouse could be on shaky grounds if the member remarried or died. Post-divorce pension contributions could also be transferred into a new scheme not tagged by the earmarking order.
Pension sharing
Pension sharing was introduced from 1 December 2000 due to deficiencies in the above two systems and is now the most commonly used. This involves the splitting of pension between the two parties with immediate effect and doesn't involve waiting till retirement.
The ex-spouse is given a pension credit against the member's pension rights; a cash value that can continue with the original pension provider but treated separately.
