When assets need to be valued, following a relationship breakdown for example, effects like property, cars and savings immediately come to mind, yet most people have a major asset, their pension, which is often overlooked or undervalued.

A transfer value of a pension can be a considerable amount, especially if your employer has also contributed over a number of years, or if you have been employed in a government funded profession such as the NHS, police or teaching. The transfer value is the amount that can be moved from one fund to another if you were changing from one pension provider to another, and this is usually the starting point in pension valuation.

Sometimes it becomes more complex, as some careers, such as the police, have pensions which can be taken before the normal pensionable age of 60 or 65 and this makes them more valuable. In these cases a further assessment may need to be made and additional advice taken.

When estimating pension rights in the event of a relationship breakdown, the length of the marriage has to be considered, as the entitlement of the spouse may be dependent on the duration of the relationship, and the same applies to civil partners under the new legislation.

A spouse’s entitlement to pension rights can either be shared or offset. If the pension is to be shared, the starting point for calculation is often 50/50, but personal circumstances can change this proportion. Once agreed, part of the pension is transferred to the person without the pension. This is achieved by the agreed part of the transfer value being used to create a new pension, and this can be with the same provider or it can be a new company.

When a new pension fund is created, it is not available immediately, but will mature once the agreed retirement age is attained, and on maturity, it may be taken either as a regular pension payment or a small tax-free lump sum with a reduced pension payment.

The other option is for the pension to be offset against other assets. For example by receiving a larger proportion of the assets such as property in exchange for relinquishing any future rights in the pension. This is often an attractive option as it may enable the spouse without the pension to own the house in their own right, or to buy another property, knowing that the spouse with the pension will have no claim on the house in the future.

Deciding the best course of action in relation to pension rights can be complicated when divorce proceedings or relationship breakdowns are inevitable. Always take professional advice as a wrong decision can have long term implications.

If you want more information on pension rights or other legal matters, contact Helen Hope, partner at Motley & Hope Solicitors in Biggleswade. Contact Helen on 01767 600600 or e-mail helenhope@motleyandhope.co.uk.