What’s a Pension Sharing Order?
As part of the financial settlement in a divorce, a court may order your former partner to split their pension with you in a process called ‘pension sharing (PSO)‘. If this happens you’re entitled to take a share of their pension straight away and may be able to join their pension scheme or move it into a pension of your own. Not all pension providers will accept a transfer of this nature, so you’ll need to speak to the company you wish to transfer to before taking any action.
An earmarked pension, on the other hand, is the proportion of an individual’s pension owed to their former partner when they start withdrawing.
How does a Pension Sharing Order work?
A Pension Sharing Order’s a court order that allows couples to divide their pension funds upon divorce. The court has the power to divide both defined benefit and defined contribution pensions, but not your State Pension benefits. It’s important to note that the Pension Sharing Order isn’t a substitute for a clean financial break between the parties.
Both parties will need to provide financial information to the court in order to calculate the amount of the Pension Sharing Order. The split’s calculated using a formula that considers the age, earnings and other factors related to the couple’s finances. The spouse receiving the split portion can either take it as a lump sum or transfer it to a pension of their own.
How long after a divorce can you request a Pension Sharing Order?
When a couple gets divorced their pensions are usually included in the financial settlement along with property and other assets. Without a ‘consent’ or court order confirming the settlement, both parties can make a claim on their former partner’s pension, regardless of how long they’ve been divorced.
How long does it take to carry out a Pension Sharing Order?
The length of time it takes to set up a Pension Sharing Order depends on the complexity of the case and the speed of the pension provider. Once the order’s been issued, the pension administrator has up to four months (from the point of receiving all relevant information) to carry out the Pension Sharing Order.
Are there restrictions for pensions which are already paying out?
No, even pensions in drawdown can be divided. The remaining balance can be shared between the parties if it’s deemed appropriate to do so.
Which type of solicitor and court handles Pension Sharing Orders?
Only the Family Court has the power to grant Pension Sharing Orders. Typically both parties will seek legal representation from a specialised Divorce Solicitor to file paperwork on their behalf and advocate for their best interests during court proceedings. Not all divorces will result in a Pension Sharing Order.
What are the pros and cons of Pension Sharing Orders?
Here’s some considerations when applying a Pension Sharing Order to a divorce:
Pros of applying Pension Sharing Orders:
- Ensures both parties are provided for following the divorce proceedings.
- May increase the pension savings of one spouse.
- Allows for both parties to have a clean break, financially.
Cons of applying Pension Sharing Orders:
- Fees may be taken from the pension to cover the Pension Sharing Order costs.
- May decrease the pension savings of one spouse, which they may have relied upon to support their retirement income, had the marriage not resulted in divorce.
- Higher earners may be impacted by an increased pension pot triggering the Lifetime Allowance.
In episode 14 of The Pension Confident Podcast, we discuss the impact your relationship status has on your finances - whether you’re single, cohabiting, separated, divorced, or widowed. Hear from the Founder of This Girl Talks Money; Ellie Austin-Williams, Barrister and Family Mediator; Paul Infield and Director (VP) Public Affairs at PensionBee; Becky O’Connor and listen to the episode, watch our guests in the studio or read the transcript now.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 20-02-2023
