When facing a divorce, understanding what happens to your pension can be one of the most important but complex aspects of reaching a fair financial settlement. Pensions are often one of the largest assets in a marriage, second to the family home. This guide explains how pensions are divided in a UK divorce, the different methods available, and why it’s crucial to seek expert legal and financial advice before making decisions.
How Are Pensions Divided in a UK Divorce?
In England and Wales, all pensions whether they are workplace, personal, or private can be considered as part of the matrimonial assets to be divided in a pension divorce settlement. This includes both parties’ pension pots, even if one partner built theirs before the marriage.
The court’s aim is fairness, ensuring that both parties can meet their future financial needs, including retirement. There are three main ways pensions can be dealt with in a divorce settlement, let’s take a look at what these are:
1. Pension Sharing Orders
A pension sharing order is the most common and direct way to divide pensions in a divorce. The court can order that a percentage of one party’s pension be transferred to the other’s pension pot. This gives both individuals independent control over their respective pensions moving forward.
Pension sharing provides a clean break, meaning each person can manage their own retirement savings without future financial ties to their former spouse.
2. Pension Offsetting
Pension offsetting involves balancing the value of one party’s pension against other matrimonial assets. For example, one spouse might keep their pension while the other receives a larger share of the family home or savings.
This option can be more flexible, but it requires a careful calculation of the pension’s true value and how it compares to other assets. It’s essential to obtain an expert pension valuation before making decisions about offsetting.
3. Pension Attachment (Earmarking) Orders
A pension attachment order, also known as an earmarking order, allows the court to direct that some or all of one person’s pension benefits (such as lump sums or income) be paid to their former spouse when they begin receiving them.
This method doesn’t provide a clean break because the receiving spouse’s income depends on when the pension-holder retires or draws their benefits. As such, it’s less commonly used today.
What Factors Do Courts Consider?
When deciding how to divide pensions during a divorce in the UK, the court will consider:
- The value and type of each pension
- The length of the marriage or civil partnership
- The financial needs, obligations, and resources of each party
- Age and health of both individuals
- Standard of living during the marriage
- Contributions made to the family (financial or otherwise)
Why Legal Advice Matters
Pensions can be complex to value and divide fairly. It’s essential to obtain advice from both a family law solicitor and an independent financial adviser with pension expertise. Mistakes or misunderstandings at this stage can have long-term effects on your retirement income.
At Bromfield Legal, our experienced divorce solicitors can guide you through the entire process, from assessing pension values to negotiating a fair financial settlement and securing the right court orders.
Find out more about our divorce and separation services and how we can help protect your future.
FAQ’s
1. Are all pensions included in a divorce settlement?
Yes, all pensions including workplace, personal, and sometimes state pensions, can be included. However, only the additional state pension (not the basic state pension) may be shared.
2. Can I keep my pension if my spouse has their own?
Possibly. The court will consider all circumstances, including the size of each pension and the overall fairness of the proposed split.
3. Do we have to go to court to divide pensions?
Not always. Many couples reach an agreement through mediation or negotiation, formalised in a consent order approved by the court.
4. How is a pension valued for divorce purposes?
The pension provider will issue a Cash Equivalent Transfer Value (CETV), which represents the lump-sum value of the pension benefits. Specialist valuations are often recommended for defined benefit (final salary) schemes.
5. How long does it take to get a pension sharing order?
Once agreed or ordered by the court, the implementation can take up to four months, depending on the pension provider’s processes.
If you’re facing a divorce and need expert help with pension and divorce in the UK, contact Bromfield Legal today. Our specialist family law team can help ensure your settlement is fair and protects your financial future.
