It is a sad fact that many military marriages end in divorce. Those who serve in HM Armed Forces make a commitment to sacrifice life and limb for their country if required, but sadly, many also sacrifice their marriages. The pressures of the job itself, the periods of time spent apart and the requirement to move frequently are factors often cited as reasons for marital discord and subsequent breakdown.
In many divorces within the Armed Forces the pension is one of the most valuable, if not the most valuable matrimonial asset.
- The Family Team at Field Seymour Parkes have in-depth knowledge and experience of these complex pensions and specialise in advising on how to deal with them on divorce. We are recognised by the Forces Pension Society as having the required expertise and practical experience to provide advice of the highest calibre to members of HM Armed Forces and their spouses going through the divorce process. We offer a 10% discount on our fees to members of the FPS.
If you are currently serving in HM Armed Forces, there are four pension schemes you could have rights to:
- AFPS 75
- AFPS 05
- RFPS 05 (reservists only)
- AFPS 15
All of these pension schemes are capable of being shared within divorce.
- The pension may well be held in the name of the serving spouse. However, if during the marriage the serving spouse was supported in their career by the spouse who stayed at home to look after the home and/or the children, or who moved around the country to enable the serving spouse to gain promotion, then the law states that their contribution is equally important to the contribution that the serving spouse themselves make to the acquisition and value of the pension rights.
- In divorce proceedings, therefore, it is very common for a legitimate claim to be made for a share of the Armed Forces Pension held in the name of the serving spouse.
How does it work?
- A pension is not a liquid capital asset. It is not possible, therefore, for monies to be drawn out of the pension in order to settle the claims of the non-serving spouse (save in cases where retirement is imminent and then the tax free lump sum may be available). Careful thought will, therefore, need to be given to how the claims of the non-serving spouse can be settled and there are several options.
Offsetting
- A capital sum or a liquid asset can be offered to the non-serving spouse instead of a share of the pension. The serving spouse can suggest to the non-serving spouse that they will keep their Armed Forces pension intact but in return they will take on marital debt, pay the non-serving spouse a lump sum or even transfer a property to the non-serving spouse in return for the non-serving spouse dismissing their claims to the pension.
Pension Attachment
- Pension attachment is very rarely used. A pension attachment order can be made in divorce proceedings requiring Veterans UK to pay a proportion of the pension payments of the serving member over to their former spouse. Such an order comes to an end on the death of the serving spouse and on the re-marriage of the non-serving spouse and for these reasons they are not at all popular. The far more popular order is the Pension Sharing Order.
Pension Sharing
- A Pension Sharing Order can only be made in divorce proceedings. This requires Veterans UK to deduct from the pension of the serving spouse a certain percentage of the value of that pension – called the pension debit. That debit is transferred by way of a pension credit to a new pension created in the name of the former spouse who themselves become a member of the Armed Forces Pension Scheme with a completely separate pension in their own name, which they can draw on in retirement.
- The pension of the serving spouse post pension share will continue to be held by the serving spouse and will increase in value as a result of their continued service but will be free from any further claims by the former spouse.
How is the percentage of the pension share calculated?
- It is extremely dangerous to assume that a 50% Pension Sharing Order will create equality in retirement. This is not necessarily the case, and the correct percentage is something that has to be very carefully calculated using the services of a specialist pensions on divorce expert (normally a qualified actuary) who will consider the ages of both parties, their health, life expectancy and other factors which the parties themselves may want the actuary to consider. The expert should also be given details of other pensions that may be in existence, to include the pension provision amassed by the non-serving spouse. The fact that the non-serving spouse has and is retaining their own pensions is likely to reduce the percentage pension share of the Armed Forces Pension.
Practical Guidance
The following tips may be of use:
- You will be asked to obtain the CEV of your Armed Forces Pension – the Cash Equivalent Value. You can apply to Veterans UK for this, and they will charge a fee for supplying it. Do not apply for the CEV, therefore, until you are ready to proceed with the disclosure and negotiation process as the value will quickly become out of date. But also bear in mind that it will take Veterans UK some weeks to supply the CEV.
- Do not consider pension sharing or offsetting without assistance from a specialist pensions on divorce expert (PODE) who will prepare a report to assist the parties and court to determine the most appropriate and fair outcome. We can recommend some appropriate experts and prepare and advise on the letter of instruction.
- It is essential that the letter of instruction is given careful thought and consideration to ensure that the right questions are asked in order to achieve the desired outcome. Our in-depth knowledge and understanding of Armed Forces Pensions enables us to do this very effectively. One of our Partners, Lindsay Davies, sits on the Institute and Faculty of Actuaries Pensions on Divorce Working Party. She works closely with specialist pensions actuaries to develop and improve how pensions on divorce reports are prepared.
- In order to negotiate a financial settlement in divorce proceedings there needs to be a process of financial disclosure whereby both spouses disclose to each other full and frank details of their income, outgoings, capital assets, including pensions, and their liabilities. Only once this disclosure has been exchanged should you proceed to negotiate.
- Settlement negotiations can be conducted direct between spouses, within the mediation process or through solicitors for the parties. Contested court proceedings should be avoided if at all possible because they are very costly and highly contentious. Often it is advisable to compromise, even on important points, if this avoids a costly court battle.
- The court will not approve any financial settlement which is not fair to both parties. You will require the assistance of a solicitor to prepare the required court documentation to record and implement the settlement reached. You may also require the assistance of a solicitor to persuade the court of the fairness of a matrimonial settlement, particularly one which does not provide for a Pension Sharing Order or which leaves one party with all of the other assets. If the court does not approve the settlement, there will be no order in place dismissing spousal claims which could lead to further claims being brought at a later date (when the pension may have increased in value through further service and/or promotion).
- The court cannot approve a settlement until the conditional order stage of the divorce proceedings. It is not at all advisable (and could be highly prejudicial) to conclude divorce proceedings without having an order in place dismissing spousal financial claims.
Key contacts:
Lindsay Davies – [email protected] (0118 851 6230)
Bethan Thomas – [email protected] (0118 951 6303)
