Pensions in Divorce – The Asset Too Important to Overlook 

Why pensions must be considered in divorce settlements and how to protect your future

When separating or divorcing, most people focus on immediate concerns—who stays in the family home, how the children will be supported, and how day-to-day finances will be managed. But there’s one asset that’s often left out of the conversation – pensions.

This is a costly mistake. Recent research shows that women in the UK are losing an average of £77,000 in pension wealth after divorce. In many cases, pensions aren’t ignored because they don’t matter, but because they seem too complicated, or people simply don’t know they’re entitled to a share.

Why are pensions important?

Pensions can be one of the most valuable assets in a marriage—sometimes worth even more than the family home. If they’re not included in financial negotiations, one person may walk away with significantly more long-term security than the other.

This affects anyone going through divorce, but particularly women, who may have taken time away from work for caring responsibilities and often have smaller pension pots as a result.

Are pensions included in divorce settlements?

Pensions are part of the overall matrimonial assets and can be divided using:

• Pension sharing orders – splitting the pension pot fairly.
• Pension attachment orders – receiving a share of the income when the pension is paid.
• Offsetting – giving up a share of a pension in exchange for another asset (such as equity in the home).

While these tools exist, they’re not used as often as they should be. A University of Manchester study found that fewer than 15% of divorces involved a pension sharing order, even though many divorces involve older couples approaching retirement.

Do pensions always need to be divided during divorce?

Not every divorce will result in pensions being split, but they must always be considered as part of the financial settlement. Whether a pension is shared depends on many factors, including the circumstances of the couple, the value of the pensions involved, and the overall balance of assets.

Where one party has built up a much larger pension—for example, after many years of employment while the other focused on childcare—pension sharing can help ensure both parties have sufficient retirement income. This is why the courts take pensions seriously, even if they are not immediately accessible.

In general, if pensions are worth over £100,000 in total, the Pensions Advisory Group recommends instructing a pension on divorce expert (PODE). These specialists can prepare a pension sharing report, setting out how pensions could be divided fairly and what percentage transfer may be appropriate.

For couples aiming for a clean break, pension sharing orders are often the most practical solution, as they divide the pension at the time of divorce, rather than leaving financial ties in place for the future.

How are pensions calculated for divorce settlements?

Pensions are valued using the cash equivalent transfer value (CETV), which represents what it would cost to transfer the pension benefits to another provider. This figure is usually supplied by the pension scheme on request.

Although the CETV provides a starting point, it doesn’t always reflect the true worth of the pension, particularly for final salary or public sector schemes. This is another circumstance where specialist input from a PODE report would be highly recommended. These PODEs are typically jointly instructed by the parties, through their solicitors.

In divorce proceedings in England and Wales, all pensions must be disclosed, regardless of whether they were built up before or during the marriage. For pension sharing orders, a CETV must be obtained at the negotiation stage, to inform discussions on potential settlement and reach an agreement in principle.

Depending on the circumstances (such as the final basis of the settlement, time elapsed, and in particular the type of pension involved) it can also be beneficial to obtain a further CETV(s) before the final quantum of any order is finalised, to fine-tune the calculations.

Parties should also be aware of ‘moving target syndrome’ when it comes to pension sharing orders. Because it takes time to implement a pension sharing order, even after a court order is made (often a matter of months), the CETV of the pension against which the pension sharing order is implemented, will not be the same as the CETV contemplated by the parties and the court when the order was made.

What should you do?

If you’re facing divorce, there are some key steps you can take to make sure pensions are dealt with properly and fairly:

• Make sure all pensions, including private, workplace, and state pension, are fully disclosed.
• Get expert advice if the pension is complex or difficult to value.
• Understand the long-term impact of any agreement, especially if you’re considering trading pension rights for another asset.
• Avoid assuming pensions are too difficult to deal with or that they don’t apply to you.

For a broader view at the divorce process, including how pensions fit in, our step-by-step guide to divorce is a useful starting point. Read the full guide here.

How we can help

Our specialist family law team regularly advises clients on pensions in divorce, including those with significant or technical pension assets. We’ll help you understand your rights, gather the right information, and secure a settlement that reflects both your current needs and your future.

Pensions might not be top of mind right now—but they’ll matter later. We’re here to make sure you don’t lose out on what you’re entitled to.

If you’re considering divorce, or are already in the process, don’t leave your financial future to chance. Get in touch with our family law team today to arrange a confidential consultation and find out how we can support you.