How Is Your Pension Treated In A Divorce Settlement?

Posted onDecember 2, 2025

If your marriage breaks down, it is crucial to understand how pensions will be valued, treated, and divided before you negotiate a financial settlement.

Our Pensions and Divorce Solicitors in London can advise you on your divorce and help you reach a fair financial settlement.

Contact OTS Solicitors Today for Divorce and Pensions Legal Advice.

Pensions and financial settlement proceedings

Any pension is relevant to financial settlement proceedings after a divorce or dissolution of a civil partnership, including:

The state pension.
Company pension schemes.
Final salary pensions.
SIPPs.
Public sector pensions.

The relevance of a pension if you are divorcing

Your pension must be disclosed as part of your financial disclosure when you negotiate a financial settlement or are involved in financial remedy court proceedings.

Many people do not think their pension will be relevant to their divorce settlement because:

The pension is in their name, so they do not regard it as a family or matrimonial asset.
The pension is in a company pension scheme.
The pension contributions were made before the marriage.
The marriage did not last long.
The pension is entwined with a family business.

In all these scenarios, a pension must be disclosed. You or your spouse may be able to argue that a pension should be ignored, but it must be disclosed so the court can consider its relevance.

Consequences of non-disclosure of pension assets

There are implications if you do not disclose a pension. These include:

The court could make additional disclosure orders and costs orders.
The court could make adverse inferences. This would go against you when the court makes a financial court order.
The court could reopen the original financial court order if the existence of the pension comes to light after the judge makes a court order.

If a financial settlement is reached through negotiation or family mediation and one spouse fails to mention a pension, the other can argue that the agreement is not binding as it was made on a false premise.

Pension treatment options in financial settlement negotiations and court proceedings

A couple can agree, or a family judge can make:

A pension sharing order.
A pension attachment order.
Provision for one spouse to receive a greater share of the non-pension assets so the other spouse can retain their pension.

The financial court order will depend on the judge’s assessment of what constitutes a fair financial settlement, having regard to the statutory factors in Section 25 of the Matrimonial Causes Act 1973. These factors include the husband and wife’s ages, the length of their marriage and their respective reasonable housing and income needs.

How to work out the best pension option as part of a financial settlement

To work out the best pension option as part of a financial settlement, you need to:

Ensure that all pensions and other assets are disclosed.
Check that the pension/s are accurately valued. You may need to ask an actuary to value the pension/s as part of the financial settlement negotiations or court proceedings.
Make sure any pension complexities are understood. An actuary or your financial advisor may be able to clarify these.
Take time to consider the overall financial settlement and to reality test the proposal.
Get confirmation from the pension administrator that they can implement a pension sharing order.
Ask the court to make either a financial consent order after reaching a negotiated financial settlement or ask the court to make an order after the final hearing of a financial remedy application.

Valuing a pension in divorce proceedings

Everyone is entitled to an annual pension statement that includes a pension value. This valuation, often referred to as a transfer value, is usually disclosed as part of a voluntary or Form E financial disclosure.

A transfer value may not accurately reflect the value of a pension. It may either significantly overvalue or undervalue a pension. Typically, a Pensions and Divorce Lawyer will look out for:

Public sector pensions, as the transfer value may not reflect the amount you would need to secure an equivalent pension income if you put the same figure into a private pension scheme.
A company pension scheme where the transfer value may be overstated if the pension is underfunded.
A SIPP where property pension assets have not been valued for a while, so the transfer is based on historical figures. For example, a SIPP that owns the business premises where the family business operates from.
A pension with a significant transfer value may be near or reach the lump sum and death benefit allowance.

An actuary can accurately value a pension and can also advise on any complicated aspects of the pension fund or its rules. For example, the pension may not allow an internal transfer, meaning that if a spouse receives a share of the pension, they won't be able to join the existing scheme. Instead, they will need to opt for an external transfer. Alternatively, a spouse receiving a share of a pension may not be entitled under the pension scheme rules to receive a pension income at the same age as their ex-spouse, who was the original member of the pension scheme.

An actuary is usually instructed by Family Law Solicitors jointly on behalf of a husband and wife. A joint agreed letter of instruction and any supplemental questions are submitted to the actuary. Most pension actuaries will not report on a single pension solution but instead advise on options to achieve either parity of transfer values or equality of pension income on retirement.

Frequently used pension dividing options

There are two main pension dividing options:

The court makes a pension sharing order.
You both keep your own pension funds, and if there is a disparity in the value of the pension funds, one of you gets a bigger share of the other family assets, such as savings or the equity in the family home. This is sometimes referred to as pension offsetting.

If you agree to a pension share or pension offset, it is crucial to ensure the pensions are correctly valued. If you do not, you could end up with a situation where:

You both retain your pensions with similar pension transfer values. However, on retirement at age 60, you get a pension of £20,000 a year, and your former spouse gets an annual pension income of £30,000 a year, despite being the same age. This is because one pension fund had a low transfer value compared to the pension income returns.
You get to stay in the family home, but you do not receive a share of your former spouse’s pension. If your former spouse has a public sector pension, such as an NHS or civil service pension, you may find that, if you sell your property to downsize on retirement, the equity realised is not sufficient to give you an adequate income to live on. The financially savvy option may have been to downsize at the date of your separation and agree a financial settlement that enables you to rehouse whilst also meeting future pension needs.

Pension tips and divorce

Here are some of our Family Law Solicitors' pension tips:

If you are separated and want a share of your spouse’s pension, no-fault divorce proceedings will need to be finalised before you can obtain a pension order. That’s because a pension administrator needs a financial court order and a pension share annexe to implement the pension share. If you have reached a financial settlement, your Family Lawyer can ask the court to make an agreed financial court order without you or your solicitors needing to attend a court hearing.
In the long term, talking to a financial advisor and getting a pension actuary report can save you thousands, even if you do not see the value in getting the report at the time of your separation or divorce.
The court cannot make a pension sharing order if a pension scheme has already been subject to a pension share, for example, after a first marriage and divorce.
Many people struggle to recall all their old pension schemes if they have had lots of jobs. You can use the pension tracing service to locate old pensions.
It may not be financially viable to negotiate a pension share if the fund has a relatively low value. Some pension schemes charge thousands to implement a pension share, whilst others make no charge.
You may want to consider the advisability of negotiating a pension sharing order if your spouse has a property-based SIPP with fellow company directors. That’s because your retirement income may be tied up with others and may not give you the flexibility you need. An actuary or financial advisor can explain if it will be possible to negotiate a pension share that allows you to extract pension funds and invest them with an external transfer into one of the many high street pension providers, such as Aviva.
A pension share is not implemented when the court makes a financial court order, but when the pension administrator implements it. A spouse who is sharing their pension fund should cease voluntary contributions until the pension share has been implemented.
It is essential to negotiate a financial settlement that meets your needs. This may include your retirement needs, depending on your age and the length of your marriage. If you obtain a clean break financial court order, you cannot renegotiate your financial settlement if you later realise that the order does not meet your needs, unless you can show that your ex-spouse withheld financial disclosure or was dishonest.
If you negotiate spousal maintenance as part of your financial settlement, you may be able to go back to court and ask the family court to make a pension sharing order instead. A Family Law Solicitor can advise you on the likelihood of your being successful in an application to capitalise your spousal maintenance payments or to substitute the payments with a pension share.
Once a pension share has been implemented, the pension is yours to do with as you like. You are not tied to your ex-spouse’s financial and retirement decisions, but you will be subject to the pension scheme rules.

Pensions and Divorce Solicitors in London

Contact OTS Solicitors Today for Expert Family Law Legal Advice.

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