Pension sharing orders fall 35% despite increase in divorces

A growing number of individuals have overlooked pension assets in divorce proceedings since the introduction of online DIY divorces and could be missing out on the largest divisible asset aside from the family home, according to new figures obtained by Nockolds.

Data from a freedom of information request showed that the number of applications for pension sharing orders, which instruct pension providers to divide the value of a pension fund between parties, had fallen by 35 per cent since 2017, from 36,202 to 23,622 in 2021.

This is despite a slight increase in the total number of divorcees, with the most recent data revealing that 103,592 couples divorced in England Wales in 2020, a 1.6 per cent increase on 2017.

Additionally, there had been a year-on-year increase in the average age of divorcees since 1985, with an average mean age at divorce of 46.4 years for men and 43.9 years for women, which could mean divorcees are missing out on even more by failing to consider pension assets.

Indeed, Nockolds explained that, as the average age of people getting divorced rises, the value of pension pots increases to the point where the value may exceed the matrimonial home.

“Older couples going through divorce often place undue emphasis on the house, the car and other savings while disregarding pensions," explained Nockolds family law senior associate, Francesca Davey.

“Because a pension is usually in one spouse’s name and is associated with their employment, there is often an incorrect assumption that it isn’t sharable."

She continued: “Ignoring pension assets can be financially disastrous for someone with little or no retirement provision. If a spouse has built up even a modest final salary pension, there is a good chance that it will be worth considerably more than the average UK house.

"While most people will have a good idea what their house is worth, far fewer know what their spouses’ pension is worth, what its benefits are worth, or even how many pensions they have or who their fund is with, which leads to a skew in priorities in dividing matrimonial assets.”

However, this trend may be set to worsen, as whilst the use pension sharing orders has already fallen amid DIY online divorces, Nockolds suggested that the introduction of no-fault divorces from 6 April 2022 is also likely to add to the problem.

“The new rules are likely to lead to more hasty divorces in which the applicant does not consider all the financial remedies available to them," argued Davey.

"The online divorce portal does not provide guidance or make suggestions on what financial remedies are most appropriate in different circumstances.”

Furthermore, whilst some divorcees may also be opting for a pension attachment order, rather than a pension sharing order, Nockolds warned that this is often an "inferior choice" as it does not prevent a person from transferring money out of their pension or oblige them to continue paying in.

In contrast, a pension sharing order means that the fund is immediately divided between the spouses, meaning the applicant knows what is going into their pension pot now and can plan.

Davey added: "People getting divorced later in life need to think carefully about whether a pension attachment or a pension sharing order is the most appropriate remedy.

"A pension attachment order is risky unless the pension is already in drawdown, and it is important to look at exactly what benefits the pension type offers to avoid losing out by choosing the wrong option."

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