What happens to your pension during divorce?

When couples separate, one of the most complex and often overlooked assets to deal with is the pension. While many people focus on the family home, pensions can actually be one of the largest financial resources in a marriage. Understanding how they’re divided is vital to achieving a fair settlement.

This guide explains how pensions are treated under family law in England and Wales, the options available for dividing them, and what you should consider before reaching an agreement.

Why do pensions matter in divorce?

During a marriage or civil partnership, both partners may build up pension savings, either through workplace schemes, private pensions, or the State Pension. These savings are intended to provide income in retirement, but they are also a form of shared marital wealth.

Under English family law, pensions are included in the “matrimonial pot” if they were built up during the marriage. Even pension funds started before the marriage can sometimes be taken into account, particularly in long relationships, or where excluding them would result in unfairness.

How are pensions valued?

Each pension has a cash equivalent value (CEV) or cash equivalent transfer value (CETV). This is an estimate of what your pension would be worth if it were transferred to another scheme. Pension providers can usually supply this figure, but it’s important to note that:

The CEV may not accurately reflect the true value or future income of the pension, especially for defined benefit schemes (such as final salary pensions).
It is often wise to obtain a pension actuary’s report to ensure valuations are realistic.
The court expects both parties to give full financial disclosure, including all pension arrangements.

What are the options for dividing pensions?

The court has several mechanisms for dealing with pensions in divorce. The right approach depends on individual circumstances, the type of pensions involved, and the wider financial picture.

1. Pension Sharing Orders

This is now the most common approach. A Pension Sharing Order divides the pension at the time of the divorce, allowing a percentage to be transferred into a new pension in the other person’s name.

It creates a clean break, as each person then owns their own pension independently.
The receiving party can usually invest it in a pension scheme of their choice.
Pension sharing applies to most workplace, private, and personal pensions (but not the basic State Pension).

2. Pension Offsetting

Here, one person keeps their pension, and the other receives a larger share of another asset, such as the family home, to compensate.

This can be attractive if one person wants to remain in the house.
However, offsetting can be risky because it compares immediate capital (property equity) with future income (pension benefits) which are two very different things.
Expert valuation advice is crucial to ensure fairness.

3. Pension Attachment Orders (formerly Earmarking)

This method instructs the pension provider to pay a portion of the pension income or lump sum directly to the other spouse when benefits are drawn.

It keeps the pension in one person’s name but shares the benefits later.
This does not provide a clean break, and payments stop if the pension holder dies or the recipient remarries, so it’s used less often today.

State Pensions

While you can’t divide the basic State Pension, you may be able to share certain additional State Pension entitlements (such as the old State Second Pension or SERPS).

It is worth checking your State Pension forecast via the government website and discussing with your solicitor or adviser whether these benefits are relevant to your settlement.

The Role of the Court

Even if you and your ex-partner reach an informal agreement, it’s crucial to have it made legally binding through a Consent Order approved by the court.

Without a formal order, your ex could make future claims, even years later.

If you can’t agree, the court can decide how pensions (and other assets) should be divided, based on fairness, needs, and contributions under section 25 of the Matrimonial Causes Act 1973.

Key pension considerations:

Get specialist advice: Pensions are complex and can vary widely in structure and value. Family lawyers often work alongside financial advisers or actuaries to ensure fairness.
Think long-term: Don’t underestimate the importance of retirement income — even if a pension feels less tangible than property or savings.
Aim for equality, not exact matching: The goal is to meet both parties’ needs fairly, not necessarily to split every asset 50/50.
Act promptly: Pension valuations can take time to obtain, and delays might affect negotiations.

In Summary

Pensions can be one of the most valuable and complicated assets in a divorce. Whether you are the main earner or have built up little pension provision yourself, understanding your entitlements is essential.

With the right advice and a fair legal process, it is possible to reach an arrangement that protects both parties’ financial futures and provides stability in retirement.