The minimum contributions that employers and staff are to pay into automatic enrolment workplace pensions are to increase from 6 April 2019 (this does not apply to defined benefit pension schemes). From that date, the minimum employer contribution will be 3% (at present it is 2%) and the minimum employee contribution will be 5% (it is 3% at present).

Pensions are relevant to divorce law, in that when a married couple separate, their respective pension entitlements are taken into account in calculating the total matrimonial ‘pot’ to be shared on divorce.

What is in the matrimonial ‘pot’?

All of the assets and liabilities built up during the marriage are ‘matrimonial’ and are taken in to account in determining the value of the matrimonial ‘pot’ and how it is to be divided on divorce. The exception to this is gifts received from a third party during the marriage, or inheritance. If, however the gift or inheritance is converted into another asset during the marriage (for instance if it is used to purchase a house) that asset is matrimonial property. In those circumstances, an argument can be advanced that account ought to be taken of the fact that the asset derived from non- matrimonial funds (the gift or inheritance).

In calculating the value of the matrimonial ‘pot’, the capital value of the parties’ pensions is also taken into account- this is known as the ‘cash equivalent transfer value’. If the pension began prior to the marriage is necessary to apportion the value to show the value for the period of marriage only. The calculation used to determine this is set out in Regulation 4 of The Divorce etc (Pensions) (Scotland) Regulations 2000. Following the case of McDonald v McDonald [2017] UKSC 52, 2017 SLT 837, even if a spouse stops contributing to a pension during the marriage, the period of non-active or deferred membership is taken into account- albeit this may be subject to a ‘source of funds’ argument.

Is it possible to share pension rights?

Under Scots Law, it is possible for the court to order, or for the parties to enter into an agreement, providing that a pension is to be shared on divorce, as part of overall settlement. This involves pension being transferred from the scheme of one spouse to a separate scheme in the name of the other spouse. Pension sharing can only take effect once divorce has been granted.