What affect does divorce have on your pension?

After a home, a pension fund can be the second largest asset owned by a family. A pension plan is usually valued in terms of its transfer value at the time of any divorce proceedings, and is valued in that way either to be shared or to offset any assets awarded to either partner. It is not always prudent to assume all assets will be divided in “half”, and in many cases that does not occur.


A partner who has sacrificed their income in the course of a partnership, in order to care for children being one example, could expect to benefit from any pension earned by their partner while the relationship lasts. In the case of divorce, however, this would no longer be the case, and hence the fate of any pension accrued will have to be decided either between the partners or via legal proceedings.


Over the last 10 years the law has changed regarding divorce and pensions. The courts' consideration of financial matters within the divorce agreement must now include pension scheme provision. Furthermore, three measures have been introduced in an attempt to provide a greater flexibility and choice for both the divorcing couple and the courts themselves, these are as follows:

  • Offsetting - Any pension benefits held by the couple are offset against any other assets. The party with the pension rights keeps them for him/herself and the other party is given the benefit of other assets, such as the right to live in the matrimonial home. 
  • Earmarking - A specified amount of the member's pension and/or lump sum is payable to the ex-spouse.
  • Sharing - The pension and the pension rights are shared between the couple. This is suitable for members of occupational, personal or stakeholder pension schemes. Pension sharing is not compulsory and does not apply, in the same way, to the basic State Pension.


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