Changes to the state pension scheme could mean that divorced people could see their pensions drastically reduced.
The new single tier state pension came into force in April 2016, replacing the old two-tier system. The new rules, which apply to people who reach the state pension age on or before 6 April 2016, mean that the state pension will be based only on an individual’s own national insurance (NI) contributions. To receive the full flat rate pension of £155.65 (16/17 rate) a week, an individual must have made, or been credited with, 35 years NI contributions (as opposed to 30 years under the previous scheme). Without 35 qualifying years of NI contributions, only 1/35 of the full pension rate will be paid for each year a qualifying year.
The changes will be especially significant for anyone who divorced before 6 April 2016 but is not at retirement age. The old system allowed non-earning divorced people to claim a full state pension based on NI contributions made by a spouse or civil partner during the time they were married or in a civil partnership, as long as that person had made full contributions. It was known as a category B pension or a substituted category A pension. The spouse’s or civil partner’s own state pension was not affected. As the majority of non-earning spouses are likely to be women having given up a career to bring up a family – it is a move that is likely to affect far more women than men.
However, since April 2016, this is no longer the case and anyone who divorced before 6 April 2016 but retires after that date is likely to lose out if the state pension was not taken into account in their divorce settlement – and it rarely has been.
It is vital, therefore, if you are getting divorced or a dissolution of civil partnership, that you take expert advice on financial matters, and that includes discussing the potential loss of state pension, as it can be accommodated in any financial agreement made.
Family Matters’ mediation experts can help you ensure that any financial agreement reached as part of your divorce will ensure that the potential loss of state pension is taken into account and an allowance made in the financial settlement.
Juliette Dalrymple
Family Matters’ managing director, Juliette Dalrymple, says “It is more important than ever that people are aware that decisions they make now as part of a divorce will affect their pensions in the future. We inform people of the potential implications and ask them to seriously consider getting legal and financial advice within mediation before making final decisions. It’s also vital that family mediators are kept up to date with legal and financial matters, and, as one of the leading trainers of mediators in the region, we are keen to ensure that pension matters remain high on our agenda.”
You can find out more about the single tier state pension on the government’s website.
You can also get an estimate of what your state pension will be here.
