Pensions and divorce
If you’re not married or in a civil partnership, your pension can’t be divided when your relationship ends. If you’re married, your options will vary depending on whether you’re in the processes of separation and divorce. Separation pension spouse rights mean that you may be able to start claiming benefits from your partner when separated, however you need to be getting a divorce before you can explore divorce entitlements such as a financial settlement.
Usually when you get divorced or dissolve a civil partnership, you have to declare all of your assets so that they can be valued and split. The combined pensions of you and your partner can be one of the most significant assets you’ll need to assess and should be included in your financial settlement.
You’ll need to find out the total value of all of your pensions, including any workplace or personal pension schemes you are a member of. Your State Pension may also need to be considered depending on your circumstances and whether you reached State Pension age before or after 6 April 2016. You can find out more information on how this may be affected by divorce on the gov.uk website.
Ways to split your pension
Where you live in the UK will have an impact on how your pensions can be divided. In England, Wales and Northern Ireland the total value of both pensions will be taken into consideration, which includes any amounts you both saved before marriage. Pension splitting in divorce works slightly differently in Scotland as only the pension amounts saved during your marriage are counted. This means that anything you both saved early on in your careers before you met or after you separated is excluded.
There are five main options to split a divorce pension.
- Pension sharing
Pension sharing on divorce lets you take a percentage share of your former partner’s pension pot straightaway. It provides a clean break and you can either join their pension scheme or transfer your money to a scheme in your name.
- Pension offsetting
Pension offsetting is when you use the value of your pension to offset other assets, such as property. It could allow you to keep your pension, for example, while your former partner is awarded a larger share of another asset such as your shared home.
- Pensions attachment order
A pensions attachment order (or ‘pension earmarking’ in Scotland), is when some of your pension is paid to your former partner, usually when you start to withdraw it. Unlike some of the other options, this doesn’t provide a clean break as one partner is reliant on the other to begin drawing their pension.
- Deferred lump sum
A deferred lump sum is similar to a pension attachment order and enables you to receive a lump sum when your former partner retires. It’s not available in Scotland but can be used anywhere else you divorce in the UK.
- Deferred pension sharing
If there’s an age gap between you and your former partner, and they are already drawing a pension, you can apply for a Deferred Pension Sharing Order which allows the younger party to delay taking their pension entitlement until they reach pension age. This option isn’t available in Scotland either.
In situations where both you and your former partner have retired, pensions can still be split, however it won’t be possible to take a share as a lump sum.
Timeframes for splitting a pension after divorce
Once you’ve reached a divorce settlement with your former partner you should instruct your solicitor to draw up a ‘consent’ or court order which will turn your financial settlement into a legally binding agreement. As soon as this is approved by the court it is final, and neither party will be able to make any additional claims for money in the future.
Where a financial settlement has not been formally agreed and there is no consent order, both parties can exert their divorce pension rights and make a claim on the other’s finances, regardless of how long they have been divorced. There’s no time limit to this and a claim can be brought at any time until a consent order is put in place. While a consent order isn’t mandatory, it’s a good example of how to protect your pension in divorce.
The information in this article should not be regarded as financial advice.
Last edited: 28-03-2019