Can My Ex Claim My Pension When We Divorce?

A major research project in 2021* revealed hug gaps in pension wealth between men and women. The research shows that men aged 65 and 69 have more than six times the pension wealth of their partners, whilst for those aged 55 to 64, their pension wealth is likely to be three times greater. In the age range most likely to divorce (those aged between 45 and 54), men are likely to have double the pension pots of married woman.

When a couple get married, their respective financial resources fall into the “matrimonial pot” of assets and become available for distribution in the event of a divorce. Pensions are often the most valuable asset to take into account.

Many separating spouses are surprised by this as they consider their pension assets to be exclusively their own, but the division of pension assets is often a fundamental element of a financial settlement following a divorce. The court will essentially look to address any significant imbalance in spouses’ pension positions taking into account factors set out in the Matrimonial Causes Act 1973, with the starting point being an equal division. When the court looks at achieving equality in respect of pensions, it is generally looking at re-distributing the parties’ pension assets to ensure that they both have the same pension income in retirement. However, pensions are complicated assets and achieving equality in respect of pensions is not necessarily as simple as adding up the parties’ respective pension values and dividing the total figure in half. It is therefore essential that financial advice is taken alongside legal advice and consideration given to the type of pension and benefits which one party may gain or lose following divorce.

There are several ways in which pensions can be dealt with in a financial settlement on divorce. These include pension sharing order, pension earmarking or off-setting. A pension sharing order involves a percentage of one party’s pension being transferred out of their existing pension scheme into a separate scheme in the other party’s name. Whilst the court can also earmark a pension for a party, this is not commonly used, as pension sharing is the preferred approach as it allows parties to go their own separate ways and be in control of their pension assets, without being dependent on the other. Another option is off setting. This involves cash being paid upfront in lieu of pension assets. A cash sum in advance is often regarded as more valuable than money preserved in a pension as the pension asset may not be accessed for several years. To that extent, pension off-setting is rarely conducted on a pound for pound basis. Pension offsetting can be cheaper than pension sharing, but either way, we will always ensure that parties take pensions advice from a reputable pensions adviser/actuary to ensure that unforeseen disparities or benefits are factored in before adjustments are made.

Until recently it was often the case that spouses could successfully ring-fence any pension assets accrued prior to the marriage. However, the court has said that it prioritises needs over protecting pre-marital assets and therefore the more common approach now is to focus on achieving equality in respect of pension assets, regardless of when they were accrued. Negotiating the division of pension assets is complicated and the first step is to exchange up to date financial disclosure which should include the Cash Equivalent Transfer Value (CETV) in respect of all pension schemes held.

Ready to take the next step? Talk to us in confidence and find out where you stand. Our team of divorce and family law specialists – in London, Milton Keynes, Bicester and Watford – can advise and guide you from the moment we start working with you. Get in touch – we’re here to help.

* Report of a MICRA Seedcorn Project supported by the Pensions Policy Institute

This article is intended for the use of our clients and other interested parties. The information contained in it reflects the author’s view and is believed to be correct at the date of publication. However, it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional legal advice.