Pensions and divorce

If you’re getting divorced, working out how to divvy up your pension savings may be the last thing you want to think about, especially if retirement is still many years away. But while making decisions about your retirement income may seem less important than deciding who gets the family home, a fair division of pension savings should be a top priority in any divorce settlement. This guide explains why, and how to make decisions surrounding pensions and divorce.

How does a divorce affect a pension?

Your pension is a financial asset that – like any other asset – will need to be taken into consideration in a divorce, or the dissolution of a civil partnership. This applies whether or not you’re already drawing your pension.

If both members of the couple have a pension, then pension schemes owned by each of them need to be taken into account.

The rules on how much of a pension is taken into account are slightly different in Scotland versus England, Northern Ireland and Wales.

• In England, Northern Ireland and Wales, the total value of all pensions is taken into account, regardless of when they were built up.
• In Scotland, only the value of pensions built up during the marriage or civil partnership are taken into account. So, any pension that was built up before you married or formed a civil partnership won’t usually count.

Does the type of pension affect what happens after a divorce?

Yes. The rules for the state pension are different to the rules for workplace pensions or personal pensions, such as SIPPs.

How are personal and workplace pensions divided after divorce?

There are 3 main ways in which a pension can be handled in a divorce or the dissolution of a civil partnership.

Pension offsetting

The pension isn’t divided. Instead, it’s offset against other assets. So, one person might keep their pension, while the other retains all other savings and investments, for example.

Pension sharing

The ownership of a percentage share of one person’s pension is transferred to the other person. Depending on the pension scheme rules, this might be an entirely separate scheme or the same scheme the pension has come from. A pension provider has up to 4 months to enforce a pension sharing order from receiving necessary information.

Pension attachment orders

Under these orders (known as “pension earmarking” orders in Scotland), when your pension benefits start to be paid, some of the benefits are redirected to your former partner. In England, Northern Ireland and Wales, this can apply to either pension income or any tax-free lump sum, or both. In Scotland it only applies to the lump sum, and can’t be used to redirect income.

Dividing up defined benefit workplace pensions can be more complex than it is with defined contribution pensions. It may be possible to arrange for the scheme to pay a share of income to the ex-spouse, as under a pension attachment order. Another alternative is to transfer the value of the scheme into a pension pot that can be divided according to the financial settlement. However, you should seek regulated advice before doing this, as you may lose valuable scheme benefits by doing so.

How is the state pension divided after a divorce?

This depends on which type of state pension you get. You can read more about the different types and entitlements in our full state pension guide.

New state pension rules

The “new” state pension is paid to those reaching state pension age from 6 April 2016. The new state pension cannot be shared following a divorce.

However, if you receive a “protected payment”, the court might order this to be shared. This is an extra amount typically paid if your entitlement under old state pension rules was higher than the maximum new state pension.

Previous state pension rules

If you reached state pension age before 6 April 2016, you’ll receive your state pension under the old rules. There are 2 parts to this: the basic state pension and the additional state pension.

An individual’s basic state pension entitlement can’t be shared. Some people will only have built up this part. However, if you’ve also built up additional state pension, the court can order this to be shared following a divorce.

Divorced couples can also use their former partner’s National Insurance contributions to increase their own basic state pension, without affecting the other person’s entitlement.

Any rights to a former partner’s state pension are lost if you remarry or form a civil partnership before you reach state pension age.

Does it matter who has saved the most into a pension?

Typically not. Or, at least, it certainly won’t be the most important factor under consideration when deciding who gets what in a divorce. This decision can be particularly complex if you have financially dependent children, or one member of a couple is financially dependent on the other.

Bear in mind that a divorce settlement takes into account all of a couple’s assets, not just pensions. Divorce law can be complex, but agreeing a fair divorce settlement is primarily about the future needs of each person, rather than past contributions.

Am I entitled to a share of my long-term partner’s pension if we weren’t married or in a civil partnership?

Typically not. Under usual circumstances, neither member of a former couple in this situation is automatically entitled to a share of the other’s pension. Even if you’ve been living together in what’s often known as a “common-law” marriage for years, you don’t usually have the same legal protection as married couples or civil partners. There are some exceptions in Scotland.

Bottom line

If you’re getting divorced, or contemplating the possibility, make sure any financial settlement doesn’t overlook pension savings. It’s arguably one of the most important assets to take into account in a divorce. And whether you have substantial pension savings, or none at all, it’s worth taking time to establish the best pension-sharing approach for you and making sure this is clearly outlined in a legally binding agreement.

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Frequently asked questions

• Am I entitled to a share of my spouse's pension if we divorce?

  It’s not quite as simple as that. A financial agreement following divorce will take into account all assets held by the former couple. These will include properties, pensions, savings and other assets. The aim of a divorce agreement is to achieve a division that is “fair and equitable”. This doesn’t necessarily equate to a 50:50 split of each asset. There are 3 main ways in which a pension can be taken into account, as we’ve outlined above. If one member of a former couple has a substantial pension built up, and the other has very little or nothing at all, this should certainly be taken into account in any divorce settlement. In this case, pension sharing might be the most appropriate option. It will guarantee that both people have some provision for retirement.

• How can I protect my pension in a divorce?

  The best way to protect your pension in a divorce, regardless of who has the biggest pension pot, is to draw up a legally binding consent agreement that includes a fair division of pension savings. This will ensure a member of the couple that might have built up fewer pension savings is provided for in retirement. It’s also likely to be the best option for the person with more pension savings. That’s because it reduces the risk of a former spouse making an unexpected (and permitted) claim against the pension long after the divorce.

• Do I have to share my pension evenly with my ex when I divorce?

  Not necessarily. It depends on how you agree to split your assets as a whole. This will usually be confirmed by a legally binding consent order or court order. Your pension will only be part of this. For example, it may be the case that one person receives the full pension entitlement and the other receives separate but equally valuable assets to offset this.

• Is there a time limit on making a claim on a former partner's pension?

  No. In many cases, former married couples or similar partners will draw up a court-approved and legally binding agreement on how to split assets, including pensions. If this is the case, the agreement is final as soon as the court approves it. Neither partner will be able to make any subsequent claims. However, if you split things less formally, and there is no court order in place, there’s no time limit on either partner’s rights to make a claim on the other’s pensions.