Division of Pension Entitlements
When a marriage has irretrievably broken down and ends in divorce, it is essential to clarify the financial claims between the spouses. Pension rights equalization plays a crucial role in securing retirement benefits. This process involves dividing the pension entitlements acquired by both partners during the marriage.
Unlike the division of marital property (Zugewinnausgleich), pension rights equalization is automatically carried out by the competent family court. However, dividing pension entitlements between the spouses may not always align with the couple’s intentions. Particularly in cases of significant income disparities, this can create an imbalance. To prevent this, the pension rights equalization can be individually regulated by the spouses through a prenuptial agreement or a divorce settlement agreement, rather than leaving it to the court, advises the law firm MTR Legal Rechtsanwälte, which also provides counsel on family law matters.
Pension Rights Equalization Aims to Eliminate Imbalance
Roles within a marriage are often distributed differently. One partner frequently works full-time, earning a higher salary and accumulating greater pension entitlements than the other partner, who may have reduced their work commitments or worked part-time to support the family and care for children. This results in long-term effects on pension entitlements, which tend to be lower for the latter.
Pension rights equalization is conducted to eliminate this imbalance and ensure financial security in retirement. This process follows the principle of equal division. In simple terms, the pension entitlements accrued by both partners are divided equally. As a result, the pension claims of the higher-earning partner decrease, while those of the other partner increase accordingly.
The pension rights equalization considers not only claims from the statutory pension scheme but also entitlements from private pension plans, professional pension schemes, occupational pensions, and additional provisions in the public sector.
Court Conducts Pension Rights Equalization
There is no need for either spouse to apply for pension rights equalization, as it is automatically conducted by the competent family court. However, exceptions exist if the division of pension entitlements would be grossly inequitable or if the marriage was of short duration. In such cases, an application for pension rights equalization must be submitted. If there are no significant differences between the pension entitlements accrued, and the de minimis threshold is not exceeded, pension rights equalization may be waived.
The division of pension entitlements may not always be perceived as fair by the couple. However, they do not have to leave the calculation of pension rights equalization to the court. Instead, they can establish their own arrangements in a prenuptial agreement or a divorce settlement agreement.
Establishing Individual Agreements
If pension rights equalization is to be regulated in a divorce settlement agreement, it must be notarized or recorded as a judicial settlement by the competent family court. If this formal requirement is not met, the agreement is invalid. Many couples seeking divorce are unaware that a divorce settlement agreement can be concluded even during ongoing divorce proceedings.
Just as in a divorce settlement agreement, pension rights equalization can be wholly or partially excluded in a prenuptial agreement. However, care must be taken to ensure that neither spouse is unduly disadvantaged. Such clauses could render the agreement invalid. Therefore, it is crucial to ensure that any agreements on pension rights equalization are legally sound, as otherwise, the court would determine the pension rights equalization.
Many couples reject the idea of a prenuptial agreement, viewing it as unromantic. However, reality shows that romance does not always endure in marriage, and about one-third of marriages in Germany end in divorce. While no couple expects this outcome when they marry, it offers an opportunity to establish important agreements in a prenuptial agreement during harmonious times. Should a divorce occur, the couple can part ways without significant legal disputes, as key issues have already been resolved. For example, not only can provisions regarding pension rights equalization be made in a prenuptial agreement, but also agreements on the division of property and other claims can be individually tailored.
MTR Legal Rechtsanwälte provides counsel on divorce and other family law matters.
Feel free to contact us!
