When couples separate, focus often shifts to the family home, savings, and immediate income. Pensions are frequently overlooked, either because they seem distant or are perceived as too complex.
In reality, pensions are frequently among the most valuable assets in a divorce and among the areas where misunderstandings can have lasting consequences.
Carla Fraser, Partner and Head of Family Law at Allsopp Campbell Rainey, explains: “Pensions regularly come as a surprise in divorce.
“People often underestimate their value or assume they are untouchable, when in fact they can be central to achieving a fair settlement.”
In Northern Ireland, pensions are part of the overall financial picture in divorce. They are considered with property, savings, and income when the court or parties determine a fair division of assets.
For many couples, especially where one person has taken time out of work or worked part-time, a pension may be the largest asset after the family home.
Ignoring pensions can create an imbalance. A settlement may seem fair initially but may leave one party financially vulnerable later if pension provision is not addressed.
Common Misunderstandings About Pensions
Pensions often cause difficulty due to assumptions that do not reflect how divorce law works in practice. Common misunderstandings include:
- The ‘Wait and See’ Fallacy: Believing pensions cannot be touched until retirement.
- The ‘Marriage Only’ Myth: Assuming only contributions made during the marriage and not periods of cohabitation are relevant.
- The ‘Small Pot’ Error: Thinking small or irregular contributions do not impact the final settlement.
- The ‘Simple Swap’ Trap: Assuming that “offsetting” a pension against the house is always a straightforward or risk-free calculation.
Each of these assumptions can be misleading. Even pensions that cannot be accessed for many years have a cash equivalent transfer value (CETV), which must be understood before making informed decisions.
How Pensions Are Dealt With on Divorce in Northern Ireland
Pensions can be addressed in several ways during a financial settlement. In some cases, spouses choose to offset their pension against another asset.
Alternatively, a pension sharing order may transfer part of one person’s pension into the other person’s ‘pension pot’.
The appropriate approach depends on the overall asset mix, future income needs, ages, and retirement plans. There is no single solution for every case.
As Carla Fraser notes: “The right approach to pensions depends on the wider picture. What works for one couple may be completely unsuitable for another, which is why early advice is so important.”
Why Pensions Often Delay Settlement
Pensions can delay divorce negotiations because they require specialist information. Valuations must be obtained, and complex pensions will almost always require an expert report from a pension actuary. It is important that different types of pensions are treated appropriately, and future implications carefully considered.
Without clear advice, pensions can become a sticking point, especially when one party is uncertain about exchanging long-term security for immediate assets.
Obtaining accurate information early can prevent pensions from causing delays or mistrust later in the process.
The Long-Term Impact of Getting It Wrong
Decisions about pensions are difficult to reverse. A settlement that prioritises short-term needs over long-term provision can have serious consequences years after the divorce is finalised.
This is especially relevant where one party has relied on the other’s pension provision during the marriage.
A Practical Takeaway
Pensions may seem distant, but they require careful attention during divorce. Understanding their value and available options is essential to achieving a fair settlement now and in the future.
Allsopp Campbell Rainey advises clients across Northern Ireland on divorce and financial settlements, including complex pension arrangements. Contact Carla Fraser or the Allsopp Campbell Rainey team.