Pension Awareness Week: Pensions on Divorce – What Do You Need to Know?
Posted on in Family Law
It’s Pension Awareness Week from 15th September 2025. Pensions can be one of the most valuable assets within a marriage, yet they are often overlooked by spouses who are separating. In this article, we hope to help demystify pensions and offer some considerations for individuals looking to address financial matters alongside divorce or dissolution proceedings.
The starting point for the division of finances on divorce or dissolution is equality, i.e. 50/50. Pensions are capable of being shared within a financial settlement, and it is important not to overlook them. The Court seeks to achieve fairness for both spouses, not only in the immediate future but also in retirement, and the division of pensions can be crucial to achieving this. A pension share can be agreed mutually between spouses and recorded within a Financial Consent Order or ordered by the Court in formal financial remedy proceedings.
Initial steps to take?
1. Identify any and all pensions in your name.
2. Request the Cash Equivalent Transfer Value (CETV) for all pensions. These requests can take several weeks to be processed and often longer for public sector pensions.
3. Request confirmation of your State Pension forecast or current entitlement.
Types of pension:
· Defined Contribution (DC) – can be workplace pensions set up by your employer(s), or private pensions. The value is based on your contributions and growth over time, with market fluctuations. The CETV is usually representative of the fund’s value.
· Defined Benefit (DB) – often referred to as ‘Final Salary’ schemes, these can be private or public sector schemes. A fixed amount is paid out to pension members when they retire. The amount payable is calculated based on factors including the number of years you have been a member of the scheme and the salary you earn at the point of retirement. Public sector schemes include the NHS, Teachers, Armed Forces, Local Government, and the Police. These CETVs are often undervalued.
· State Pension – this is paid by the government on your retirement once you reach state pension age. The amount you receive will depend on the number of qualifying years of National Insurance payments made. Your basic rate State Pension cannot be shared, but your Additional State Pension can be considered.
Options for addressing pensions on divorce
Pension Sharing – if there is a disparity in the parties’ pension fund values, it is possible for one spouse to receive a share of the other’s pension(s). The amount of pension to be shared is expressed as a percentage. Depending on the type of pension scheme, a pension share can be transferred as a pension credit for the receiving spouse to invest in their own pension fund, or the transfer can be into the same scheme via an internal transfer.
Pension Offsetting – if there are other capital assets, it is possible for one spouse to receive a greater proportion of those assets and a reduced or no pension share. This is the process by which the right for one spouse to receive a present or future pension benefit is effectively traded for present capital. It is vital to obtain specialist advice from a pension expert for this.
Pension Attachment Order – this is where payment is made directly from one spouse’s pension, which is in payment to their ex-spouse. These are rarely made but can be appropriate in certain specific circumstances.
Divorce itself does not dismiss financial claims. There can be serious financial implications if the finances have not been formally resolved and approved by the Court. This is particularly so in respect of pensions if one spouse were to die before a resolution is reached. Addressing pensions on divorce is complex, and it is always advisable to obtain independent legal and financial advice as early as possible to understand the options available to you.