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Don't Settle for Anything Less

By: Andy Farquarson
 The Guardian, July 20, 2002

A pension could be a couple's most valuable matrimonial asset, in some cases worth more than the equity in the family home. Yet although legislation now allows divorcing women to apply for a share of their husband's pension pot, a survey conducted by the Solicitors' Family Law Association (SFLA) reveals that few consider pension sharing a priority when negotiating divorce settlements.

The survey found that clients were often unaware of the new provisions, dismissed pension sharing as too complicated or adversarial, or took a short-term view driven by immediate needs such as housing, cash income, child support or a car. These findings are reinforced by recently announced figures showing courts have made very few pension sharing orders since the introduction of the new legislation. The low take-up is even more surprising, given that women are less likely than men to have a personal pension or belong to an occupational pension scheme.

Consequently they represent well over two thirds of over-60s dependent on income support.

In part, this is because many women interrupt their careers to raise families, or give up work to provide a home for the breadwinner - the very injustice the new pension sharing scheme was designed to redress.

Yet a recent parliamentary answer revealed that only 367 pension sharing court orders have been made since the law changed last year.

This worries Steve Webb MP, a professor of social policy and Liberal Democrat spokesman on work and pensions. "For generations, married women have been the poor relations when it comes to pensions," he says. "High divorce rates mean they look set to remain the poorest pensioners in future. If the government is serious about preventing pensioner poverty, it should examine the reasons for the failure of pension splitting."

But has it failed? Many finance and legal professionals believe it is too early to tell. "Admittedly, it's been a steep learning curve," says Karen Wright of specialist financial advisors Options For Women. "We often find our clients' solicitors seeking guidance from us and even some pension managers seem unclear on the new law."

Ms Wright points out that pension sharing is not appropriate in all cases, and that negotiating a fair split can be a lengthy process. "We have dealt with several cases where resolving pension issues has stretched out over many months," she says, "but the long-term gains can be very substantial."

Susan Deas, a barrister practising family law, agrees the professions are still feeling their way. "It's taking a while for advocates and, indeed, judges to adjust from long-established practice.

"There is still a mindset in some quarters which says the woman gets the home, while the man hangs on to his pension. Nonetheless, I believe we will be seeing many more pension sharing orders in future. In disputed cases, lawyers will need to work closely with clients' financial advisers, and also be more aware of actuarial factors - a woman's longer life expectancy means she needs a larger fund than a man to receive the same pension, for example."

Solicitors are also cautiously optimistic. "Compared with the initial excitement in the media, uptake of pension sharing may appear slow," said an SFLA spokesman. "But the first cases were, effectively, pilots. Now a growing number of our members are specialising in this area."

Richard Sax is a family law solicitor and former chair of SFLA. He gave evidence to a House of Commons committee on pensions and divorce and feels expectations were raised unduly.

"The government initially claimed there could be as many as 50,000 pension sharing orders each year," he says. "But the legal profession always felt this was wildly optimistic."

Mr Sax points out that pension sharing can be a complex matter. "Clients need to understand the importance of a pension, and balance that against more immediate needs such as the home or child support. They have to ascertain the pension's value and compare it with the other assets, considering, too, the likely expenses of pension sharing - for example, the cost of getting information from fund trustees, pension transfer charges, fees to independent financial advisors, and so on."

"Getting sound advice is the key requirement," Mr Sax says. "I think all the professions involved - lawyers, judges, IFAs and pension specialists - should be specifically trained in sharing issues and should work collaboratively. Luckily, that is increasingly the case, so divorcing couples- who might previously have foregone valuable benefits - need no longer lose out."

A change in the law that proved a financial lifeline

"Pension sharing has proved an absolute lifeline," says Patricia Sherratt, 54, who divorced this April after 31 years of marriage. "Without it, I'd have nothing to live on."

The former family home was sold on divorce and they both bought smaller properties. Initially, Mrs Sherratt lived on money she had inherited but with that gone, she had no other income to look forward to.

"Although I'm a trained cartographer, I spent most of my married life at home raising our two children.

"My ex-husband was in the ferry business; he recently retired as a senior manager having built up a substantial final-salary occupational pension.

"Until the law changed, women in my position were dependent upon their ex-husbands for maintenance payments - when the man died, the woman's income died with him. Now, women have the independence of their own pension.

"I tried several financial advisers and chose one called Options For Women because they knew about pension splitting and could instruct my solicitor."

"Having spent my life raising our family, I'm entitled to my share of the pension. It's now my sole income. However, although my ex-husband has been able to draw his half of the pension without cost, I've had to pay for financial advice and management, and for transferring and re-investing my share.

"That aside, woman facing divorce should understand how important pension sharing can be."

Who qualifies

Married couples (but not co-habitants) may apply for a pension sharing order if they petitioned for divorce on or after December 1, 2001.

The regulations apply throughout the UK and cover Serps, stakeholder pensions, occupational pensions, and personal plans. The legislation enables courts to order part of the pension of one spouse to be transferred to the other as part of a divorce settlement. The recipient gains an asset in their own right (thereby ensuring they do not have to start saving for their retirement from scratch after many years of marriage) and, unlike the established option of 'earmarking' pensions, a clean break is possible.

Pension sharing is not obligatory and when dividing assets judges will take account of factors such as age, current and anticipated assets, childcare, earning capacity and standard of living.

Who to call

Solicitors Family Law Association, www.sfla.co.uk

National Association of Citizens Advice Bureaux, www.nacab.org.uk

Pensions Advisory Service, www.opas.org.uk

Society of Financial Awareness, www.sofausa.org/

Options For Women, 01227 722933

Who benefits

Pension sharing is most appropriate where:

One spouse has an occupational pension and younger-than-average retirement age (such as police officers, aircrew, firefighters and soldiers);

The only substantial assets are the home and the pension;

One spouse has no pension of their own but the other has a substantial fund; or

The marriage has lasted a reasonable length of time.

Before opting for pension sharing you should:

Gather information about the pension(s) held by your spouse;

Find a solicitor with pension sharing expertise (SFLA has an accreditation scheme);

Consult an independent financial adviser specializing in pensions;

Ascertain the costs.

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