Pensions on Divorce

There are three ways, and most cases use one or a mix of the first two. A pension sharing order splits a percentage of one person’s pension into a pension in the other person’s name, giving you both a clean break. Offsetting means one of you keeps the pension in full and the other takes more of the house or savings instead.

Pension attachment, sometimes called earmarking, gives one person a share of the other’s pension income when they retire, but it is now rare because it leaves you financially tied together. Every pension either of you holds goes into the picture, whoever paid into it and whoever’s name is on it.

No, there is no automatic right to half. Equal sharing is a starting point for the marital pot as a whole, not a rule applied to each pension. What matters is what is fair overall, judged on the length of the marriage, what each of you needs in retirement, and the needs of any children.

A short marriage where you each have your own pension may end with no sharing at all. A long marriage where one of you built a pension while the other raised the family may end with a substantial share, or even more than half if that is what is needed to give you both a reasonable income.

A pension sharing order is a court order that transfers a set percentage of one person’s pension to the other. The person receiving the share ends up with a pension of their own, either inside the same scheme or transferred to a scheme of their choice, depending on the rules. It gives you a clean break, so neither of you depends on the other’s retirement decisions. Pension sharing is only available on divorce or dissolution of a civil partnership. It is not available to unmarried couples, and it cannot be done on judicial separation.

Yes, and this is a common outcome, particularly where one of you needs the home now more than a pension later. It is known as offsetting. The important point is that pension money and cash are not worth the same to you. A pension cannot usually be touched until 55, rising to 57 from April 2028, most of it is taxed when you draw it, and its future value is uncertain. A PODE report can help you work out a fair offset value.

So the figures are rarely swapped pound for pound, and a discount is normally applied to the pension value. Your mediator will help you both look at what you each need now and in retirement before deciding whether offsetting is the right approach.

Ask each provider for a cash equivalent value. Most schemes give you one free of charge each year, and you can usually request it online or by phone. Private and workplace schemes often reply within a few weeks. Public sector schemes can take considerably longer, so it is worth requesting these as early as possible. For the state pension, you can get a forecast at gov.uk. Bring the figures to mediation and your mediator will help you both make sense of them.

Not always. Many couples with straightforward workplace or private pensions can agree a fair split from the transfer values alone. An expert report is worth considering where there is a final salary or public sector scheme, where the pensions are large, where you want to share the pensions so you each end up with a similar income in retirement, or where a significant part of a pension was built up before the marriage.

A report costs between £1,000 and £5,000, depending on how complex the case is and whether a pensions on divorce expert or an actuary is used. In mediation you instruct one expert jointly, so you share the cost rather than each paying for your own.

They can be treated differently, although the line is rarely clean. Pension built up before the marriage or after separation may be argued to sit outside the marital pot, which reduces the amount to be shared. How much is set aside depends on the length of the marriage and the size of the pensions, and the calculation can be done roughly on a time basis or properly by an expert.

The important qualification is that needs come first. If the marital share alone does not give you both a reasonable income in retirement, some of the pre-marital value can still be drawn on.

Yes, and this is one of the areas where it pays to take care. Public sector schemes are defined benefit, which means they promise you an income for life rather than holding a pot of money. The transfer value they provide often understates what the pension is actually worth to the member, so treating that figure as if it were cash may produce an unfair result.

Sharing is still perfectly possible, but this is the situation where a pension expert’s report most often earns its cost. The same applies to most private sector final salary schemes.

The basic and new state pension cannot be shared. However, additional state pension built up before April 2016, sometimes called SERPS or S2P, can be shared by a pension sharing order, as can any protected payment element of the new state pension. Even where nothing can be shared, both of your state pension forecasts are still worth putting on the table, because what each of you will receive, and any gaps in your National Insurance record, affect what a fair overall settlement looks like.

Longer than most people expect, so it helps to plan for it. A pension sharing order cannot take effect until the divorce or dissolution is final and the consent order has been sealed by the court. Once the scheme has the sealed order and everything it needs, it has four months to implement the share. Most schemes charge a fee for doing this, which varies considerably between providers, so it is worth asking yours what it charges and agreeing between you who pays it.