Commentary: Pensions and a clean break

Pensions are often a couple's second-largest asset after their home. Yet the rigid rules surrounding pensions make a mockery of any clean- break settlement on divorce.

The National Association of Pension Funds' radical paper sent to the divorce working party of the Pensions Management Institute yesterday proposes giving divorcing couples the option of splitting pensions. This would mean that the partner with the largest entitlement could 'give' a portion of pension to the other partner as part of the divorce settlement.

A cash value is commonly given for pensions so they can be transferred from one scheme to another. It is a short step to splitting a pension value at the time of divorce.

The cash could be used to set up a pension in his - or more commonly her - own right in the original scheme or taken as a transfer value to buy a pension entitlement elsewhere. But it could not be used for anything but a pension.

These rules would not apply if the pension - or the difference between the two pensions - was less than pounds 5,000 or if the marriage had lasted less than two years.

Women who have been in poorly paid work or not worked at all during marriage and then find themselves in middle age with no pension may believe they will be much better off if these proposals come into force. But in many cases the wife is now allowed to keep the marital home while the husband keeps his pension entitlement and they call it quits.

Even if it becomes possible to split the pension, it will not possible to split the value of the home and come out with enough cash to buy two.