Key Takeaways
- Pensions are treated as matrimonial assets in divorce and must be considered as part of any financial settlement, even if they are only in one spouse’s name.
- The three main options are pension sharing (a court order splitting the pension itself), pension offsetting (keeping the pension in exchange for other assets) and pension earmarking (directing future pension income to an ex-spouse).
- A pension sharing order is the most common approach because it creates a clean break, giving each party their own independent pension pot.
- The value of a pension for divorce purposes is usually calculated using the Cash Equivalent Transfer Value (CETV), which each pension provider must supply on request.
- From April 2026, the state pension age is beginning to rise to 67, which may affect retirement planning for divorcing couples.
When a marriage ends, the family home is the asset most people think of first. But pensions are often worth just as much, and in some cases considerably more. They are one of the most valuable assets a couple can accumulate during a marriage, and they can’t simply be ignored when sorting out finances.
The law treats pensions as matrimonial assets, which means they must be considered as part of any financial settlement in divorce. In this article, we explain how pensions are dealt with in divorce, what the main options are, how a pension sharing order works in practice and what factors the court takes into account. Our divorce and family law solicitors at Osbourne Pinner can talk through your specific situation if you would like advice.
Are Pensions Included in a Divorce Settlement?
Yes. Under the Matrimonial Causes Act 1973, the court must consider all financial resources when deciding how assets are divided on divorce. Pensions count as a financial resource, regardless of whose name they are in.
This applies to private and workplace pensions. The basic state pension and new state pension cannot be shared via a pension sharing order, but other state pension entitlements such as SERPS or the State Second Pension (S2P) can be.
Pensions already in payment, additional voluntary contributions (AVCs) and self-invested personal pensions (SIPPs) can all be shared. However, survivor benefits from a previous relationship and pensions already subject to a sharing order from a prior divorce can’t.
What Are the Options for Splitting a Pension in Divorce?
There are three main ways pensions can be dealt with as part of a divorce financial settlement.
1. Pension Sharing
A pension sharing order transfers a percentage of one spouse’s pension to the other. The receiving spouse gets their own pension credit, which they can either keep within the same scheme or transfer to a different provider. The original pension holder’s fund is reduced by the same percentage.
This is the most commonly used approach because it achieves a clean financial break. Both parties leave with their own independent retirement provision, and neither is dependent on the other going forward.
2. Pension Offsetting
With offsetting, one spouse keeps their pension intact. The other receives a larger share of different assets, typically the family home or savings, to make up the equivalent value. No court order directly affecting the pension is needed.
Offsetting works when one party wants to stay in the family home rather than receive pension benefits. The difficulty is that comparing a current property value against future pension income isn’t straightforward. Accurate valuations and specialist advice definitely matter here.
3. Pension Earmarking
Sometimes called pension attachment, earmarking directs a portion of one spouse’s pension income to the other when they retire. The pension itself stays in the original holder’s name.
This option has significant drawbacks. The receiving party has no control over when the pension is taken, and payments can stop entirely if the original holder dies or if the receiving party remarries. It maintains a financial link between ex-spouses long into the future. For these reasons, earmarking is rarely used anymore.
How Does a Pension Sharing Order Work?
A pension sharing order is a formal court order that instructs a pension provider to transfer a specified percentage of one spouse’s pension to the other. Pension providers can’t act on informal agreements between the parties though. A court order is legally required before any transfer can take place.
The order states a percentage rather than a fixed cash figure. This is because the actual amount transferred depends on the pension’s value at the point of implementation, which can shift as markets move. Both the credit received by one party and the debit applied to the other will move proportionally, so the fairness of the split is preserved regardless of timing.
Once the order is made, the pension scheme has up to four months to implement it. The receiving spouse can then choose whether to keep the credit within the existing scheme (an internal transfer) or move it to a different pension provider (an external transfer).
Related: Failure to Implement a Pension Sharing Order: What Next?
How Is the Pension Valued?
For most pension sharing purposes, the value used is the Cash Equivalent Transfer Value (CETV). This is a figure the pension provider calculates to represent the current value of all future benefits under the scheme. Each provider supplies their own CETV figure on request, and it is valid for three months.
For defined contribution pensions, such as personal pensions and most workplace schemes, the CETV is relatively straightforward. For defined benefit or final salary schemes, which promise a set income on retirement, the CETV calculation is more complex and can sometimes significantly understate the true value of the pension.
In cases involving final salary schemes or high-value pensions, it may be worth instructing a pension actuary to provide an independent valuation. Getting this wrong can have long-term consequences for both parties.
How Does the Court Decide What Is Fair?
The court doesn’t automatically split a pension 50/50. The starting point is to consider what is fair based on the circumstances of the marriage and the needs of both parties.
Factors the court takes into account include:
- The length of the marriage
- The age and health of each party
- Each person’s earning capacity and ability to build their own pension in the future
- Whether there are children to consider
- The overall distribution of other assets
In many cases, particularly longer marriages where one spouse took time out of work to care for children, the court will aim to equalise the retirement income that both parties can expect, rather than simply splitting the pension pot by percentage.
If pensions are held by both parties, they can sometimes be offset against each other rather than formally shared, though this depends on relative values and what else is being divided.
What Happens to Pensions Accumulated Before the Marriage?
Pension benefits built up before the marriage are not automatically excluded from a settlement, but they may carry less weight than benefits accumulated during the marriage. Courts have discretion here.
In longer marriages or where the financial needs of one party require it, pre-marriage pension accrual may still be taken into account. In shorter marriages, the court is more likely to focus on what was built up during the marriage itself.
State Pension Age Changes in 2026
From April 2026, the state pension age is beginning to rise from 66 to 67, with the increase phased in over two years to complete in April 2028. This is worth factoring into retirement planning for anyone going through a divorce now, particularly those in their late 50s or early 60s who may have been making plans based on the previous timeline.
Do You Need a Solicitor for a Pension Sharing Order?
Pension sharing orders are made by the court as part of the overall financial settlement. To obtain one, the parties must either agree terms and submit a consent order, or go through contested financial remedy proceedings if agreement is not possible.
Because pensions are complex, and because mistakes in how they are valued or divided can affect retirement income for decades, legal advice is strongly recommended. A family law solicitor can help you understand the value of all pension assets, identify whether a sharing order, offsetting or earmarking is the right route and ensure the order is drafted correctly.
See also: What Is a Financial Remedy Order?
Speak to a Family Law Solicitor about Pension Sharing
Pension assets can be among the most complex parts of a divorce settlement to get right. The decisions made here affect retirement income for the rest of your life, so it is worth taking the time to understand your options properly.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
At Osbourne Pinner, our divorce and family law solicitors have extensive experience advising clients on pension sharing in divorce, including cases involving defined benefit schemes, multiple pensions and high-value settlements. We can advise on valuations, negotiate fair terms and ensure any pension sharing order is correctly drafted and implemented.
We offer a free 30-minute consultation to discuss your situation. You can speak with us via video call or visit our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below.
