How businesspeople can protect their pension during a divorce

Businesspeople often have substantial pensions built up through many years of hard work, but divorce can often affect this. In this article, we’re going to discuss how business people can protect their pension during a divorce.

Pensions are important to each and every one of us. They’re our funds for the future, ensuring we live a happy and worry-free life in retirement. 

In divorce, pensions are often one of the most significant assets we have alongside property. For this reason, many people, including individuals and businesspeople, want to protect their pension during their divorce. The main options available during the division of assets are a pension sharing order, pension offsetting and attachment order. Whilst they may not protect your entire pension, they can prevent future claims. 

To learn more about how businesspeople can protect their pension during divorce, keep on reading… 

How Can Businesspeople Protect Their Pension During a Divorce?

We hate to break the bad news to you, but most of the time it is not possible to completely protect your pension from your ex-spouse. This is because the courts will take into account each party’s pension during the financial settlement. In some situations they may not be included, but more often than not they are. 

Whether your spouse will be entitled to your pension will depend on many factors. This will include whether you were the main bread earner in the marriage and have a substantial pension, or if you had a lower paying job or worked less hours, resulting in less money in your pension pot. The courts will take into account many factors which are listed in Section 25 of the Matrimonial Causes Act 1973, such as the following: 

- Each party’s current and expected income 

- Each party’s current and expected financial needs 

- The family’s standard of living 

- The age of each party 

- Any party’s disabilities, mental or physical

- Contributions each party currently and is expected to make 

- The needs of any children involved 

Can Pre-Nuptial and Post-Nuptial Agreements Prevent Pension Orders?

In most divorce cases, it isn’t usually possible for pensions to be avoided in a divorce, but this doesn’t mean that it doesn’t happen occasionally. 

If you and your spouse wrote either a pre-nuptial (prior to marriage) or post-nuptial (during marriage) agreement which stated that pensions were not to be involved in the event of a marriage breakdown, the courts are most likely to take this into consideration. This is the case, as long as it does not affect any children involved and that the agreement was properly made. 

What Are the Types of Pension Sharing Are There?

Whether a pension will need to be shared amongst divorcing parties will be decided either through ADR methods or by a court order. This could even include your pensions made prior to the marriage.

To prevent further actions from being taken in the future, it’s important that once you decide which option to do, you have it set out in a financial settlement that’s approved by the court. The options are:

Pension Sharing 

A pension sharing order is where one party in the divorce is required to transfer a share of their pension to their ex-spouse, and this could be half the contents or a different percentage amount. This type of pension division is most often used due to the clean split it provides divorcees.

Pension offsetting 

Many individuals and businesspeople often do not want to share their pension, particularly where they have built a substantial amount in preparation for their future. So, if an individual does not wish to share their pension during a divorce, then it is possible to offset the pension for another asset, such as property or investments.

The benefit of pension offsetting for separating spouses is the ability to let those involved have a clean split.

Attachment order

Another type of pension order is an attachment order, where a portion of a person’s pension income will be paid to their ex-spouse. This can be in small amounts or in a lump sum, or both. The problem with this type of order is that it doesn’t allow divorced people to have a clean break. 

For separating spouses interested in looking at different pension options, moneyhelper.org.uk can provide further beneficial information to assist with decisions in private negotiation or other alternative dispute resolution methods. 

Pension Protection is Important 

We understand that, when you work hard to build a pension up so you can have the best life possible after working endless jobs, you don’t expect to have to give your hard earned money away. It can be frustrating when this does happen. 

What we can conclude from this article is that avoiding giving away part of your pension most likely isn’t possible. However, it can be done, particularly with a pre-nuptial or post-nuptial agreement or through a pension order, in particular pension offsetting. 

Have you been through a high net worth divorce? Let us know if and how you protected your pension in the comment box.

Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a legal professional if you’re seeking advice about your divorce finances. We are not liable for risks or issues associated with using or acting upon the information on this site.