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The qualitative study reported here is one of three studies commissioned by the Department of Social Security and undertaken in 1998 by Social and Community Planning Research (now the National Centre for Social Research) to monitor the impact of new legislation on the treatment of pension rights on divorce. The study involved 30 in-depth interviews with solicitors in England and Scotland who had taken part in an earlier quantitative survey, and collected more detailed information about one of their divorce cases. Full details of the research design and sample are shown in Appendix A.

The main objectives of the study were to explore the nature of financial settlements arising from divorce, the role of pension rights within them, and the different ways in which pension rights are treated. The study also aimed to explore solicitors’ experiences of obtaining and using valuations of pension rights. A particular focus of the study was to explore the circumstances that led to the use of Attachment Orders and Section 12A Orders, introduced by the Pensions Act 1995, Sections 166 and 167, which come into effect in 1996.

In this study, the sample of solicitors was purposively selected from survey respondents, using information generated by the survey to ensure suitable composition. In the final sample, there were 13 cases that had involved earmarking, nine of which had used an attachment or Section 12A Order. Full details of the sampling approach and the composition of the final sample are shown in Appendix A.

Solicitors’ early assessment of a case is a complex mixture of their own views and judgements, the circumstances of the case and the wishes and priorities of their client. Some solicitors used general principles which guided their approach, for example seeking a fair or an equal division of assets, and others said their assessment was purely driven by the circumstances of the case or the wishes of the client. There was a widespread sense of the importance of solicitors’ discretion and the need for creativity in reaching solutions to complex cases.

Working out the appropriate way to resolve a financial settlement was said to be dependent on a range of variable circumstances. The factors which were on the whole emphasised by respondents were: length of marriage; ages of parties; ages and needs of children; needs of parties for income and housing; income, earning capacity and other resources.

Respondents described the importance of assessing immediate needs, for housing and for income, and also future needs. Future needs generally appeared to be given lower emphasis than current needs, except in cases where the couple were nearer to retirement age.

An important principle which respondents generally said underpinned their assessment of the options in a case was the desire to achieve a ‘clean break’. Solicitors in Scotland mentioned the Scottish legislation as the basis for this principle. Respondents said that in their experience clients also often sought a clean break.

There was a widespread understanding among respondents that pensions should be taken into account in the financial settlement. Respondents also, on the whole, recognised the value of pension rights. However, there were very mixed views about what a claim on a pension was based on: fairness; compensation; or needs.

Both partners in a couple were said by solicitors to have a low awareness that pensions should be taken into account. There was a general belief that husbands can be possessive about their pension rights. Solicitors also felt that some wives can be reluctant to claim against a husband’s pension rights. It was said that this was due to a number of factors: a lack of awareness of the pension value; being persuaded by husbands not to claim; and a concern about their more immediate financial situation, rather than future needs. Reflecting this, solicitors said they approached pension rights in a different way depending on whether they were representing the husband or the wife.

On the whole respondents said that they would usually look at any pension rights and get an initial valuation. Pension rights were generally not considered worth pursuing for: a young couple with no children; a couple who were a long time off retirement; a short marriage; equivalent pension rights between husband and wife; and small pension rights (either absolute or relative to other assets). State Earnings Related Pension Scheme (SERPS) rights were seen as of low importance and rarely valued or taken into account in financial settlements.

CONTENTS

Acknowledgements
The Authors
Summary
1 Introduction
1.1 Background to the study
1.2 Study design

1.2.1 Use of qualitative research
1.2.2 Sample composition
1.2.3 Conduct of interviews
1.2.4 Analysis
1.2.5 Reporting

1.3 Divorce settlements and the treatment of pensions: the legislative framework

1.3.1 The division of matrimonial property
1.3.2 The treatment of pension rights

2 Solicitors’ approach to financial settlements
2.1 Factors and objectives guiding the assessment of a case

2.1.1 Objectives for financial settlement
2.1.2 Factors influencing asessment of a case
2.1.3 Principle of ‘clean break’

2.2 Assessment of pension rights

2.2.1 Basis of entitlement to pension rights
2.2.2 Attitudes of clients towards pension claims
2.2.3 Importance of pension rights
2.2.4 State Earnings Related Pension Scheme (SERPS)
2.2.5 Knowledge about pensions

3 Conduct and process of reaching financial settlements
3.1 Assessment of cases

3.1.1 Use of financial information
3.1.2 Ways of assessing financial circumstances and entitlement
3.1.3 Use of different resources to meet needs
3.1.4 Consideration of pension rights in settlement

3.2 Negotiating a settlement

3.2.1 The style of negotiating
3.2.2 The role of negotiation
3.2.3 Role of the client in the negotiation

4 Obtaining financial information and pension valuations
4.1 Understanding and use of Cash Equivalent Transfer Value (CETV)

4.1.1 Understanding and use
4.1.2 Concerns about CETVs
4.1.3 The process of obtaining CETVs

4.2 Obtaining other information or valuations from the pension scheme
4.3 Obtaining actuarial valuations

4.3.1 The use of actuarial valuations
4.3.2 Circumstances where actuarial valuations were sought
4.3.3 Using actuarial valuations

4.4 Valuing SERPS rights
4.5 Using valuations in negotiating settlements

4.5.1 Systematic use of the CETV
4.5.2 Systematic use of other valuation or assessment
4.5.3 Less systematic use of the CETV

5 Earmarking and other methods of dealing with pension rights
5.1 Use of earmarking

5.1.1 Ways in which earmarking was used
5.1.2 Use of Attachment Orders

5.2 The role of earmarking

5.2.1 Not enough assets to compensate
5.2.2 Capital surplus to immediate requirements
5.2.3 Couple close to retirement

5.3 Other advantages of earmarking
5.4 Concerns about earmarking