Divorce and Pensions - How Are Pensions Split?

How Pensions Are Divided in Divorce

Pensions are matrimonial assets and are taken into account when dividing finances on divorce. For many couples, pensions are worth more than they realise - sometimes more than the family home.

Why Pensions Matter

Pensions can be substantial assets:

• Workplace pensions built up over decades
• Final salary (defined benefit) schemes can be very valuable
• Personal and private pensions
• State pension rights

Three Ways to Deal with Pensions

1. Pension Sharing

The pension is split between both spouses. A percentage of one person's pension is transferred to create a pension in the other's name.

Advantages:

• Clean break - each has their own pension
• Recipient has direct control
• No ongoing ties

2. Offsetting

The pension is offset against other assets. For example, one spouse keeps the pension; the other gets more of the house equity.

Advantages:

• Simpler to implement
• No pension valuation disputes
• May preserve pension benefits

Risks:

• Comparing pension to cash is complex
• Future pension value uncertain

3. Pension Attachment (Earmarking)

Part of the pension income or lump sum is paid to the ex-spouse when pension comes into payment.

Disadvantages:

• Payments end if recipient remarries or pension member dies
• No clean break
• Less commonly used now

Valuing Pensions

Pension valuation is complex:

Cash Equivalent Value (CEV/CETV)

Request this from the pension provider. It's the transfer value if you moved the pension.

Defined Benefit Pensions

Final salary schemes often need expert actuarial valuation. The CETV may undervalue the true benefit.

State Pension

Cannot be shared directly, but NI credits may be relevant.

Pension Sharing Percentage

The share doesn't have to be 50/50. Factors include:

• Length of marriage
• Other assets available
• Each party's needs
• Age and earning capacity
• When pension was accrued

Pension on Divorce Protocol

For significant pensions, follow the 'Pension on Divorce' expert evidence protocols. A Pensions on Divorce Expert (PODE) can provide:

• Accurate valuations
• Comparison of different approaches
• Fair sharing calculations

Don't Ignore Pensions

Many people focus on the house and forget pensions. This can leave you significantly worse off in retirement.

Get Specialist Advice

Pension division is complex. MCR Solicitors ensures pensions are properly addressed in your settlement. Call 0161 466 1280.