Divorce and your pension: what you need to know

Initially, you might be more concerned about immediate financial issues like how to divide the family home or affording day to day living costs for you and your children, but you shouldn’t avoid thinking about your pension.  Many people don’t realise how valuable their pension is when compared to other assets.   

The average age that someone gets divorced is 47.7 years for men and 45.3 years for women, so it’s unlikely that your pension will be the first thing you think about when it happens. For Pension Awareness Week we’re sharing what you need to know when it comes to divorce and your pension.

Your State Pension usually won’t be affected when you divorce, although this may not be the case if you reached your State Pension age before 6 April 2016. 

However, any private or workplace pensions you have must be included in your list of assets, which means they could be split with your former spouse or civil partner.  Even if your pension itself is not split, it must still be taken into account when deciding how to settle your finances.   

To find out how much your pension is worth, you will need to ask all of your pension schemes to issue you with a ‘Cash Equivalent Transfer Value’ for divorce purposes.  Be aware though, it can sometimes take up to 3 months for them to provide this and they can charge a fee for this calculation sometimes.  Once you’ve received these values, you will have a better idea of the size of your pensions compared to other assets, such as your house.

It’s really important to understand that there’s no automatic right to receive half of your ex’s pension on divorce or vice versa.  Generally, the family courts will use a 50-50 settlement of all assets as a starting point, but how much you or your ex will be entitled to can depend on how long you’ve been married, your circumstances and the size of each of your pots plus other assets. There are also different rules depending on whether you are divorcing in Scotland or another part of the United Kingdom.   

For example, if one spouse or civil partner has a much larger pension than the other, this could be shared out between you via a Court order called a ‘pension sharing order’. Or, one party could instead take a larger share of a different asset instead of claiming from the pension, this is known as pensions offsetting.    

Even pensions offsetting, where the pension is not being split at all, can be tricky to navigate and it’s always worth seeking specialist legal advice before agreeing any settlement.

Maybe. If you got divorced many years ago but didn’t agree on a financial settlement that was approved by the court, then your ex could make a claim for some of your pension at a later date – but they’d need to persuade the court why this was appropriate after all this time.   

If the court did approve a financial settlement when you originally divorced then it’s a lot harder for an ex to change the terms of this settlement and make a claim against your pension.  This is another area to seek specialist legal advice about if you’re worried about it.

This will depend on the terms of the financial settlement you agreed to in your divorce or dissolution and whether a court order is made against any of the pensions.   

For example, if the court issues something called a pension attachment order (also called ‘earmarking’) which directs a portion of a pension or lump sum to be paid to you then this will usually automatically stop if you were to remarry and no further payments would be due. 

If the court issues a pension sharing order to split the pension so that the other party receives their own new pension entitlement then this is not affected if either of you remarry in the future as it provides both of you with a clean break. The same goes for the pension offsetting approach.

If you reached your State Pension age before 6 April 2016 then you may be able to increase this up to £137.60 per week once you are divorced if: 

• your own basic State Pension is less than £137.60 a week; and 
  
• your former spouse or civil partner had enough National Insurance contributions.