Blog » Divorce and pensions: how to protect your retirement savings

Divorce and pensions: how to protect your retirement savings

October 16, 2023
The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.

Divorce heralds a time when all properties and financial assets including pensions accrued during marriage are shared between the two parties involved. There will no doubt be conflict around how finances are divided – there are rarely clear boundaries to specific entitlements and in a family situation, sole ownership tends to blur very quickly. Hence at the time of divorce or the termination of a civil partnership, the intervention of a solicitor to mediate specific situations is essential.

More than just financial value

But how is a pension normally dealt with? How will these future savings be divided up at the time of a divorce? In the 21st century, it is likely both partners will have worked at some stage and therefore are likely to have contributed to a pension pot. It may well be that both husband and wife have envisioned the contributions they have made as security for the marriage in retirement – so who should receive the assets?

This is not as straight-forward as it may sound. For instance, suppose that one member of the partnership is deemed the main income provider (and therefore the larger contributor to a pension) while the other brings up the family and works part-time (resulting in a lower income and lower pension contributions). Clearly the value of both people in the marriage is equal, but financial retirement outcomes are not. Sharing any pensions at time of divorce needs to ensure financial equality.

It should be noted that there are different rules in Scotland from the rest of the UK. In Scotland only the proportion or value of the pension that was added to during the marriage is taken into account.

An amicable agreement?

Hopefully both parties can come to an amicable agreement without having to use a court order. But as we all know, a divorce is rarely clean cut and sometimes negative and bitter emotions tend to result in less than logical and fair decisions. So, a mediator, such as a solicitor, is perhaps essential for both parties. But where there is a need for a deeper understanding of current investment scenarios, a regulated financial adviser (RFA) can be a great support in helping divide pension funds and mapping out financial routes for the future.

Valuing your pensions

In modern society, individuals tend to have more than one pension because they are more likely to have had more than one job. So both parties first of all need to track down all pensions they may have started with previous employers (to help you track previous pensions click here).  You will not only be looking for occupational pensions, but also private pensions, SIPPS and of course your State Pensions. You will need to know projected values for yours and your partners pensions. The administrators of all pension schemes are legally required to provide projected values.

Dividing your pension investment

Settling who has the most lucrative pension pot can be difficult if you have not retired yet, but the most obvious way is to consider how much each person is contributing and over what period of time the marriage impinged on this investment.  For instance, you may both agree to transfer between each other’s pension pots to equalize projected values. An RFA would be able to consider not only the legal and tax implications, but also how this may affect future investment for both parties.


Another way to divide pension outcomes is to offset expected values against other assets held by the married couple. For instance, the value of the house or a business could be offset against the value of a pension (or pensions). This way the structure or contributions from a pension are unlikely to be changed at the time of divorce (though changes may be made by the party who has taken ownership of the pension post-divorce). For this to be effective both parties need to agree to how specific assets are divided and it also may need a legal contract to reflect how assets are going to be divided.

Deferring division

Benefits from current investments may be difficult to share out equally as each person will be unsure as to what the final value will be of a particular fund. So, another option is to defer dividing the pension pot until it has matured. In other words, each party will either take an agreed percentage lump sum or income at the time of the fruition of the pension pot. This option is not always very popular as there is no clean break from the partnership. You will be looking forward to a time in the future where you will be receiving money from your ex-spouse. The aesthetics of a divorce often call for a complete break in the here and now.

State Pension

Can each party’s State Pension be divided (or shared) at the time of divorce? The short answer is no, but it really depends on whether you were paying into the system before April 2016 or not. It was in this year that the State Pension system was modernised. Before this date the state Pension had two components: basic and additional. The former could not be divided, but a court order may state any “additional State Pension” needs to be shared following the termination of a marriage or civil partnership.

Pension sharing Order

When matters cannot be decided amicably it may be that both parties seeking a divorce will have to resort to legal court orders. A “Pension sharing order” is calculated by the courts at the time of divorce and the percentage each person receives will be dependent upon how much value each individual is deemed to have put towards the final retirement payment. Again, this may not be based on a financial figure – it will take into account each partners overall contribution to the partnership before, during and after the marriage*.

Protecting your pension

So, the first step to protecting your pension is to understand exactly what pensions you and your partner have and what their projected values are likely to be. You may be happy to transfer funds or offset a pension against another asset but a legal document (a pension sharing order) can offer much needed peace of mind. Deferring taking any pension assets is an option, but bear in mind that it can sometimes prevent a clean break at the time of a divorce. The world of pensions can be quite complex so seeking the guidance of a regulated financial adviser can be very useful. If you are divorcing after the age of 55 (when you can access your pension resources), dividing the fund may be easier.

*except in Scotland

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