Lindsay Davies, a Partner in our Family team explores this rarely used court order.
What is a Pension Attachment Order?
- A court order made in financial remedy proceedings on divorce in England and Wales which allows one spouse to receive a percentage of any benefits paid out from the other spouse’s pension.
- This differs from pension sharing, as the pension is kept in the original holder’s name until they start withdrawing funds. At this point, all or part of the pension is redirected to their former spouse. This can include a share of the pension income, lump sum benefits or death-in-service benefits.
- There is no clean break between the parties, as the recipient does not obtain an independent pension pot and payments depend on when the pension-holder accesses their benefits
How common are Pension Attachment Orders?
They have largely been replaced by Pension Sharing Orders which enable an immediate transfer of pension rights to the other spouse.
In a recent major study of divorce (the Fair Shares research https://www.bristol.ac.uk/law/news/2023/fair-shares-upon-divorce-report-professor-emma-hitchings.html), only one in ten divorcees with a pension yet to be drawn had made an agreement for pension sharing and attachment orders were described as “rarely ordered”.
It also found that only one third of divorcing couples obtain a court order resolving finances, with pensions frequently overlooked. Where pensions are addressed, offsetting and inaction are much more common than structured pension orders and there is a strong preference for a clean break, which makes attachment orders unattractive in most cases.
When might a Pension Attachment Order be useful?
Despite their decline in popularity, pension attachment orders still have some limited use in cases, such as in the event of terminal illness of the receiving party. If the pension member is already drawing their pension and the recipient has a shortened life expectancy, an attachment order can provide immediate income to their former spouse, whilst preserving the balance of the pension for the member upon the recipient’s death. It is also possible to convert a pension attachment order to a pension sharing order if appropriate e.g. if the recipient recovers.
They may also be useful in relation to pensions held overseas because not all countries allow for pension sharing. However, an overseas pension administrator may be willing to comply with a pension attachment order.
Additionally, an attachment order can be drafted to earmark death-in-service benefits, which may be useful if there is an ongoing maintenance liability which needs to be insured.
What are the risks involved in Pension Attachment Orders?
A pension attachment order will stop if the pension member dies or if the recipient remarries. This makes them high-risk for the economically weaker spouse who will lose out in these events and gives them less certainty.
It does not provide a clean break between the parties, and the recipient spouse cannot choose when the pension is taken, they cannot control investment decisions, and they are dependent on the pension holder regarding contributions and withdrawal timings. If the pension holder decides to retire early, this could significantly reduce the funds that the ex-spouse expected to receive. If they take the benefits late, then the intention of the order can be frustrated.
The recipient also bears much of the ongoing responsibility, as they must keep pension administrators informed of current contact details, monitor when the pension comes into payment and chase missed or misdirected payments. If you have a pension attachment order in place, then it is important that you ensure that this has been served on the pension provider, comes into payment when it should and that they have your up to date contact and bank details.
Overall
While pension attachment orders are not commonly used today, they do have limited utility in exceptional cases, such as terminal illness, death-benefit planning and potentially in relation to overseas pensions. They do, however, carry significant risks, notably the lack of clean financial break between parties, cessation on death/remarriage and the administrative burden on recipients.
If you already have a pension attachment order in place which you require advice on, or are interested in the potential utility of a pension attachment order being made in divorce proceedings then please contact the family and matrimonial team at Field Seymour Parkes.
