Pensions now as important as property in divorce settlements and likely to increase further

11 May 2015

For the first time pensions and property have become equally important assets in divorce settlements, with pensions likely to become increasingly so as more people begin to understand the often significant sums of money they involve.

This upwards trend has been noted by Equiniti, the UK’s largest pension administrator, who has seen a significant increase in pension valuations as a result of divorce over the past couple of years.

Equiniti expects the number of valuations to increase even further due to:

  • the greater awareness of the value of pensions following the new pension freedoms;
  • the ability to sell an annuity for cash; and
  • the recent Supreme Court ruling (Wyatt vs Vince) which could see thousands of ex-wives and husbands pursuing their former spouse for money (and pensions) years after they divorce, if no Financial Order was established at the time of divorce.(*In 2012, it was estimated that over 50,000 divorces (45%) had no Financial Order in place, a figure that has been increasing over the last decade).

Paul Sturgess, director of strategy and pensions administration, Equiniti, said; “Although the pension reforms back in the 1990s were expected to increase the importance of a pension as an asset at divorce, this did not initially materialise.  However, in recent years awareness of the significant financial value of pensions has risen, and as a result they are increasingly being assessed as an asset at divorce. This spike is likely to be further fuelled by the current focus on pensions, which has highlighted the value of both defined contribution and final salary schemes. The Supreme Court ruling is likely to also have a further knock-on effect, prompting many divorcees to revisit the fact that no Financial Order was put in place at the time of divorce. Nevertheless, not everyone fully understands the asset value of their pension and it could be a rude surprise for a divorcee if an ex-spouse was the source of this financial education years later.”