The Pensions and Lifetime Savings Association (PLSA) has updated its pension sharing on divorce guidance.
The guide is designed for use by pension funds so they can support savers in their scheme.
Pension sharing is one of the options available following a divorce or the dissolution of a civil partnership.
It ensures both parties’ futures are provided for and is especially relevant in situations where one partner has built up significantly more pension savings than the other, usually because one was the major breadwinner and the other took on more family caring responsibilities.
In about half of couples with pensions, one partner has 90 per cent of the pension wealth, according to research by the University of Manchester.
Fewer than 15 per cent of couples have pensions that are approximately equal but these disparities vary little across the income and wealth distributions.
However, an estimated 71 per cent of divorcing couples overlook pension sharing, despite private pension wealth often being one of their largest assets, and in most cases, it is the woman who loses this wealth.
The PLSA said it is important that each individual consider their pension wealth upon divorce, and private sector occupational schemes play a key role in relaying information on these assets.
As women are often the ones losing out, consideration of these assets also supports the PLSA’s efforts to ensure an adequate retirement income for all, including for typically under pensioned groups.
The newly released guidance is designed to support private sector occupational pension schemes when providing information to scheme members on pension sharing orders - court orders that help couples divide their pension funds upon divorce.
Joe Dabrowski, deputy director - policy at the PLSA, said: “Understandably, working out how to split pension assets is not the first priority for most separating couples.
“But it is really important to make sure both parties are provided for in retirement, especially when one party has been the primary earner and built up a pension, while the other – usually because they have taken on more family caring responsibilities – has not.”
The guidance includes a recommended range for schemes to charge members, as well as a flowchart outlining the circumstances when charges can be made.
The PLSA said the guidance is meant to be used as a guide only, and charges may vary contingent on the specific circumstances of each member.
The new guidance will apply from January 2, 2024, the first working day of the new year and National Divorce Day.
sonia.rach@ft.com
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