Then make sure your Pension rights are properly checked out.
Due to new state pension rules, people who Divorce now will only be entitled to a state pension based solely on their own National Insurance (NI) record. Well why not, some might say….However, if you have not worked, perhaps because you have been caring for your children then you may not have made any NI contribution for a number of years. You may have thought that your husband or wife’s NI contributions could be used to top up your NI record. After all, you have been at home caring whilst your spouse has worked. You have both contributed towards your families needs, but in different ways. Under the old pension rules, a Divorcee could claim missing NI contributions from their ex-spouses NI account and in the vast majority of cases, this had no impact or loss for the ex-spouse. For many getting divorced, this was an important provision, which enabled them to receive a full state pension on retirement. Not so anymore.
The new “single tier” state pension has replaced the old two-tier system of basic and additional state pensions. Entitlement to a state pension is now solely based on your own National Insurance (NI) record.
There will be a lot of people, predominately women who are not working and have no idea about this change. The new full state pension is currently set at a maximum of £155.65 a week, based on 35 years of NI contributions. For each year under the 35 limit you lose 1/35th of the full amount, equivalent to £4.45 a week or £231.25 a year. You need a minimum of 10 years of contributions to receive the state pension. If a spouse takes a career break for 5 - 10 years or possibly more whilst caring for children, then the impact of this break in NI contributions could be very significant on retirement.
Pension rights on Divorce and seeking a Pension Sharing Order are complex matters and essential to get right. Pension Sharing Orders allow spouses to balance out the pensions that they have, to achieve a fair division. This can involve a division of the value of the pension schemes, or the pension income that will be received on retirement. Where one spouse will lose out, perhaps as a result of a shortfall in their National Insurance record, a Pension Sharing arrangement can often be used to redress that shortfall.
Whilst pensions may not be top of your priority list right now, getting expert advice will set you up for a more secure retirement prospect later in life.
If you are Divorcing or thinking of separating, take specialist advice from our Family Team.
