Pensions and divorce
Have you ever wondered why?
Many people don’t think about pensions when they’re planning for divorce. Most often, the spouse who is getting divorced will continue to work and earn a pension. At the same time, their former partner receives retirement benefits from their previous marriage only after he or she has waited until age 65.
There are exceptions in some cases where it may be possible to claim early spousal benefits before retirement age as long as there’s proof of need, such as a disability that prevents employment.
There are two types of pensions: defined contribution and defined benefit plans. With a Defined Contribution Plan, the employer provides an account that contains contributions made by both the employee and his or her former spouse while they were married to each other.
The likelihood is higher for financial differences between spouses in these cases because one partner may have saved more than another during their marriage. There’s also less risk associated with this type of pension since it’s not guaranteed like those found under a Defined Benefit Plan will be (although there can still be some risks).
Ways to split your pension
It can be done at the time of divorce or as a part of your post-divorce property settlement.
Both spouses are entitled to their pension rights and benefits during the marriage, so both must consent to share them. Spouses may also agree with allocating pensions by creating an agreement ahead of time signed in advance and upheld upon divorce (such as when one spouse decides to accept smaller payments for a set period).
This is the most common way to split a pension during a divorce. It involves one spouse agreeing to forgo some of their rights and benefits to allow the other spouse access to that money on an ongoing basis.
Pension division via Qualified Domestic Relations Order (QDRO)
Where there are family assets, but no agreement as outlined above can be reached between spouses, or where both parties disagree with how they want them allocated, a QDRO may be used. This will involve additional paperwork and dealing with attorneys who specialize in this type of law.
The ways you can divide your pension after getting divorced include offsetting it by waiting until retirement age before claiming any payments from the pension or getting a Qualified Domestic Relations Order.
Deferred lump sum
One way to divide a pension is by taking the lump sum from it and dividing that up. This can be done in two ways, with an offsetting agreement or a Qualified Domestic Relations Order. For example, if there are no children under age 18 involved in the divorce proceedings, both parties may agree on how much they want annually for retirement income, so one party will take less than their total share of this lump sum payment.
Deferred pension sharing
Another way to divide a pension is by agreeing on how much of the payments will be taken each year. One party may even take less than their total share, but this depends on the value of the pension and what both parties are comfortable with as they have different financial needs now that they’re divorced.
If you can’t agree in either case, it’s necessary to go through an order from a judge called Qualified Domestic Relations Order or QDRO for short. This is usually done when there are children involved in your divorce proceedings who would lose out otherwise.
Here’s the deal:
Many people want to know how long after divorce can you claim a pension. It’s important to note that there are specific time limits involved with pensions sharing in the UK, so if your ex-spouse has taken their whole share of the payment already, it becomes more difficult for you to make any money all.
You may be entitled up until 12 months from when they left work or six years from when their last contribution was made, but this will depend on whether you have children who need financial support and what kind of pension scheme is involved.
It get better:
It’s possible that as much as 25% of an individual’s retirement income could go towards child maintenance payments, claiming some money from the pension complex.
The other option that you have is to claim benefits, especially if your ex-spouse has moved overseas or doesn’t know about their responsibilities towards pensions. You may need to immediately apply for one of these payments to not go into debt and then work out how you will pay back those debts later on.
Got Questions? Check These First
Can my ex-partner claim my pension after divorce?
No, they cannot. Pension entitlement is based on how much you’ve paid into the pension scheme during your working life. You’ll need to provide proof of this when claiming a benefit. It needs to be at least ten years’ worth of contributions after marriage break-up for them to have an entitlement, so if you think about that, then there’s no way for somebody who has not contributed in any way towards paying into the pension fund over those ten years can claim back or get anything out of it.
How do I protect my pension in a divorce?
Pensions are often split during divorce settlements. The law is not clear on this, but it’s generally seen as an asset of the marriage and should be divided fairly between you and your former spouse. It’s up to the court to divide assets from a marriage that was for at least ten years (unless there were good reasons why).
So if one party gets more than half, then that other person can appeal to have some money back or get some time before paying off their share to try and repay any debts built up with loans taken out when they had no idea about what their future income would like after pension entitlement goes away – which will happen very soon since pensions are being phased out.
In a nutshell:
You may be able to claim your pension if the divorce decree states it. If not, other options such as a spousal support order can give you access to part of your ex-spouse’s monthly income for life or until death. In some cases where one spouse has significantly more money than the other, they will pay their former spouse an amount each month to compensate them while waiting for their retirement funds to accumulate and start paying out.