Pensions for divorcees explained

Key takeaways

• Only 30% of couples include pensions in their divorce settlements, leaving between £2 billion and £4 billion a year in pension savings overlooked

• Pensions can be handled by pension sharing, pension offsetting, or pension attachment or earmarking

• Factors such as the duration of your marriage, contributions, pension value, and other assets all play a part when dividing pensions in a divorce

Research shows that only 30% of divorcing couples include pensions in their settlements, leaving up to £4 billion a year in savings overlooked. Women are often worst affected, with many unaware of their spouse’s pension value or even whether one exists.

How are pensions handled during divorce proceedings?

Pensions can form part of the assets considered in a divorce financial settlement, alongside property, savings and investments.

Yet research shows that only 30% of divorcing couples include pensions in their settlements, leaving up to £4 billion a year in savings overlooked.

When a divorce happens, both spouses must disclose pension details, and courts may issue orders to ensure equitable distribution. Legal advice is crucial to navigate this complex subject and secure fair outcomes for both parties.

How do pensions work for married couples?

There’s no such thing as a joint pension, married couples or those in a civil partnership can save into their own individual pensions allowing each spouse to manage their own retirement savings independently.

It’s also up to the individual person how they spend their pension in retirement.

However, both personal or workplace pensions may allow one partner to receive a portion of the other's pension in the event of death.

You can usually add beneficiaries to your defined contribution pension, including how you’d want the pension pot to be split, this could be your spouse, children or anyone you’d like to inherit your funds.

What rights do I have to my ex-spouse’s pension benefits after divorce?

Your rights to your ex-spouse's pension benefits depend on various factors, including the type of pension scheme and the agreements reached during the divorce proceedings.

These might include a pension sharing order, which typically involves a transfer of pension funds from your ex-spouse's scheme into a pension scheme in your name.

It could also be a pensions attachment order, where you have a right to a portion of your ex-spouse's pension income when they retire.

Another alternative is that the value of your ex-spouse's pension may be offset against other matrimonial assets, such as property or savings, as part of the divorce settlement.

What are my pension options after a divorce?

Pensions can form part of the assets considered in a divorce financial settlement, alongside property, savings and investments. Here are the main ways pensions may be handled:

Do pensions have to be disclosed during divorce proceedings?

Yes, both spouses must disclose details of their pension arrangements, including the cash equivalent transfer value (CETV) of their pensions.

This allows the court to assess the value of the pensions and make fair decisions regarding their division.

Divorcing couples should seek legal and financial advice to ensure that pension assets are valued accurately and divided fairly and in accordance with the law.

Can you agree to a share of pensions without going to court?

Yes, you can typically avoid court hearings for financial resolution by mutually agreeing on how to divide assets and finances with your ex-partner.

For your agreement to hold legal weight, you'd need to apply for a 'consent order' in England, Wales, and Northern Ireland, or a 'qualifying agreement' in Scotland.

If mutual agreement isn't possible, seeking a 'financial order' from the court remains an option.

What factors decide how pension assets are divided during a divorce?

A long list of factors can be considered when deciding how pension assets are divided during a divorce. These include:

What happens to my pension if I dissolve my civil partnership?

If your civil partnership is dissolved, pensions are treated in the same way as they would be for a divorced marriage.

How much of your partner’s pension you’re entitled to, or vice versa, will depend on the dissolution agreement.

If you’re in a civil partnership and separate, you have the same rights as a separated married couple.

In this case, unless you legally dissolve your civil partnership, you won’t be able to share your partner’s pension, but you might still be entitled to your civil partner’s pension or a lump sum when they die.

If you’re not married or in a civil partnership, and separate, neither party is automatically entitled to a share of the other’s pension.

Cohabitants in Scotland have some limited legal protections, but they do not have the same rights as married couples or civil partners. Take legal advice if this applies to you.

Does divorce change how much state pension I am entitled to?

Divorce does not usually change the State Pension you build from your own National Insurance record.

However, a court may order the sharing of an Additional State Pension or protected payment as part of a financial settlement. The rules are complex, so take legal advice.

Other useful guides

• State pension explained

• A guide to types of pension

• Private pensions explained

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