Pensions and Divorce

Splitting a pension

In a financial application, the court can make a decision about how a pension is divided up between a couple. If one party has, for example, given up their career to take on a homemaking or caring role in a family, they may not have a substantial pension pot themselves – and a court may feel they should be compensated as a result.

Pension rights can be lost if couples divorce. If one party has relied on the belief that in later years they will be entitled to their spouse’s pension – including if their spouse dies – then divorce or ending a civil partnership without sufficient pension provision for the future can potentially lead to financial hardship.

This can be especially relevant for couples who live together without marrying for long periods – and if one partner is still legally married, it is highly likely that if they lose their partner through death, the pension will either die with them or go their next of kin or named next of kin, as the law states a surviving partner must have been legally able to marry at the time of their partner’s death in order to inherit their pension.

Whether couples who are not legally married separate or not, it is vital to seek legal advice about what would happen if the partner with the more substantial pension fund died, especially if no will exists.

What happens to my pension if I get a divorce?

Pensions can be dealt with in a number of ways following a divorce, depending upon the particular circumstances of your case.

• Pension sharing – this is where one spouse receives a percentage share of their ex-partners pension/s. This is either transferred into a separate pension scheme in their name (known as an external transfer) or into a separate pot within their former partner’s existing scheme (known as an internal transfer).
• Pension offsetting – this is where the value of a pension is offset against other assets. For example, one spouse may receive a greater share of the family home or savings to compensate for the lack of pension provision.
• Pension attachment (formerly ‘earmarking’) – pension earmarking used to be available but has been now replaced by pension attachment orders. A Pension attachment order redirects part or all of the member’s pension benefits to the ex-spouse or civil partner when it comes into payment. Previous pension earmarking orders will still apply at the member’s retirement. This doesn’t provide a clean break, as an on-going link with your ex-spouse or civil partner will remain.