Senior Associate Solicitor Amy Langford explores how a police pension is treated during a divorce or dissolution.
In many divorce or dissolution cases the police pension is the main asset. Police pensions are complex and it is advisable to seek specialist legal advice at the outset to understand your options.
Pensions cannot be compared as like for like value with other capital assets in the marriage, they should be treated differently. Helpful guidance was published in July 2019 on pensions and is contained in a report called the Pension Advisory Group (“PAG”).
Key points considering police pension and divorce
Some of the main points in the report are as follows:-
1. Expert evidence from a pensions on divorce expert should be obtained where proportionate. It is often essential to provide evidence on the pension claim upon divorce to achieve equality of income.
2. The court is to determine the claim to a pension sharing order taking into account the income as well as their capital value. This is particularly relevant in medium asset cases where needs are an issue. In these types of cases it is often fair to provide each person with similar incomes on retirements by way of a pension sharing order rather than simple dividing the capital value.
3. When needs take precedence the court will give less weight to the contributions to the marriage and any argument to say that pensions accrued before the marriage should be excluded is unlikely to be justified.
How does a court deal with police pensions on divorce?
The police pension is an unfunded final salary occupational pension scheme and the income from within the scheme per £ of cash equivalent is generally higher than annuity income outside the scheme. This makes those with these pensions quite rightly anxious about how they will be dealt with when their relationship ends.
There are number of ways in which the court can deal with pensions;
This is the most common option. This is where a spouse receives a proportion of the pension fund in their own right. This achieves a clean break and your spouse will have their own fund in the police pension scheme.
Deferred Pension Sharing
If the pension I already in payment ie the police officer has retired then your spouse will not be entitled to receive the pension income until they reach the age of 60.
This is where the spouse does not have a slice of your pension as it is “offset” against other capital assets in the marriage. This keeps the pension in tact. This is where it is important to obtain an expert report to see exactly how much capital would be needed to offset the pension. If the police pension is the main asset offsetting may not be able to be achieved.
Deferred lump sum
This is an order requiring you to pay an amount of your lump sum on retirement to your spouse. This has the advantage of ensuring the police officer’s pensionable income will remain untouched.
This is an order requiring a proportion of your lump sum and/or pension income or your death in service grant to be paid to your spouse. This is not used as often as pension sharing orders as many spouses do not want to lose benefits on remarriage. Further, this does not provide for a clean break as the spouse will benefit from any additional payments made to the pension after the divorce/dissolution i.e. a promotion.
What happens if a “needs” case is established?
In a “needs” case and subject to the cash equivalent being valuable, where the parties are near retirement, the guidance is that the fair outcome would be for the pension sharing order to be based on an equalisation of incomes on retirement. This approach requires expert evidence.
The court’s approach is likely to be that no portion of the pension should be excluded i.e. before cohabitation/marriage and that all the pension provision, regardless as to when it accrued, should be taken into account in determining the pension sharing order unless you can show that needs can be met without recourse to it. In family law however when deciding an outcome of a case the Judge will look at all the facts in the case and will reach a conclusion that it thinks is “fair”.
If you are considering divorce and you or your spouse has a police pension our specialist team of family lawyers can help. To discuss police pension and divorce please can email [email protected] or call 01392 421777