Pension Sharing Orders: What You Need to Know

In the UK, the division of pensions during divorce proceedings is governed by specific rules and regulations aimed at ensuring fair outcomes for both parties involved.

Understanding the nuances of pension sharing orders is essential for couples navigating the intricate terrain of divorce settlements.

Pension assets, alongside property, savings, and investments, constitute the pool of marital assets subject to division upon divorce.

Establishing the value of pensions within this context is crucial for achieving an equitable financial settlement in divorce that upholds the financial interests of both parties involved.

What is a pension sharing order?

A pension sharing order is a UK legal mechanism that divides pensions between divorcing spouses, ensuring each party receives a fair portion of pension assets accumulated during the marriage.

This order enables a clean break, transferring a percentage of one spouse’s pension into the other’s name to create individual pension funds.

The process begins with a court order specifying the division percentage or amount. Upon approval, the pension provider divides the pension, providing both spouses with independent financial security post-divorce.

To formalise this division, couples must complete their divorce or dissolve a civil partnership before applying for the court order.

Complications, such as accurately valuing complex pensions or errors in the division process, may arise. Legal guidance is recommended to ensure correct implementation and prevent delays or losses.

Why is a pension sharing order important after divorce?

A pension sharing order holds significant importance after divorce, primarily because it ensures financial stability for both parties in their retirement years.

Divorce can often lead to an imbalance in pension provision, with one spouse having a significantly larger or more secure pension than the other.

A pension sharing order rectifies this disparity by ensuring a fair and equitable distribution of pension assets.

Additionally, a divorce pension share order provides certainty and avoids future financial disputes.

By obtaining a court-approved consent order, both parties have a clear understanding of their entitlements and can plan their retirement accordingly. This eliminates any ambiguity or potential for disagreements down the line.

If you don’t have legal representation, it can be difficult to understand the process involved – here’s a breakdown of how to implement a pension sharing order.

What other options are available for splitting pensions?

“How is a pension split in divorce?” is a common question among divorcing couples in the UK.

When a marriage ends and divorce proceedings are initiated there are various options available for handling pension assets, each carrying specific implications for future financial security.

The pension arrangements you decide on may include retaining the pension in its current form, transferring it to another scheme, or opting for pension sharing.

Pension sharing is the most common way of sharing pension funds with a former spouse or civil partner following a divorce, but there are two alternative options, known as pension attachment and pension offsetting.

Pension Attachment Order / Earmarking Order

Earmarking pensions, often referred to simply as ‘earmarking,’ is a mechanism by which a portion of one spouse’s pension assets is allocated to the other spouse as part of a divorce settlement.

In earmarking, the court orders that a specific percentage or amount of the pension benefits be paid to the former spouse upon retirement or another specified event.

Attachment of pension payments is made from the pension fund at source rather than from the fund holder in either regular payments, a lump sum, or a combination of both.

Pension Offsetting Order

A Pension Offsetting Order in divorce provides a clean break between all parties as the value of one spouse’s pension is exchanged, or offset, against other assets of similar value.

So in practice, instead of giving up a portion of their pension, a husband can instead waive the equivalent value of their share of the marital home.

Whether it is right to share your pensions and how you decide to share them will depend on the individual circumstances of your case.

Pensions are just one part of the overall ‘matrimonial pot’, alongside other assets, such as property, savings, business interests, investments, and valuables for example that need to be considered before agreeing to a financial settlement.

Which pension schemes allow pension sharing? 

Who pays the fees for a pension sharing order?

The responsibility for paying the fees associated with a pension sharing order can vary depending on the circumstances. In some cases, the court may order one party to pay the fees, while in others, the fees may be shared equally or paid separately.

The fees involved with pension sharing are typically paid by the pension fund member (the person sharing the pension).

It is essential to discuss the financial implications and responsibilities with your solicitor before proceeding with the application.

They can provide guidance on the likely cost and help negotiate a fair arrangement, taking into account the financial resources of both parties.

When Is Pension Sharing a Good Idea?

In England and Wales, pension sharing can only take place by court order and only upon divorce or dissolution – therefore it’s not an option for unmarried couples. Pension sharing is unaffected by the remarriage or death of an ex-spouse and could be a good option if:

• One spouse has a high value of pensions compared to other assets
• You are close to retirement age and unlikely to build your own pension pot
• You wish to take benefits from the pension credit from 50+, rather than waiting until your ex retires
• You want to nominate potential beneficiaries of death benefits if you die before taking retirement benefits

Pension sharing offers a clean break and generally provides greater flexibility to the divorcing couple and the courts ensure there’s a fair settlement.

However, this option might not be the best choice for those individuals who already have an adequate pension of their own.

Furthermore, pension sharing is not always your best option if retaining the family home is a priority. Pension sharing could lead to you having to share other assets, including property, then the family home may have to be sold.

I’ve been awarded a share of my ex-partner’s pension, what should I do?

The first thing you should do is gather all the necessary information about the pension scheme. This includes finding out the name of the scheme, the pension provider, and the value of the pension.

You should also obtain a copy of the PSO document, as it will outline the specific details of the share you have been awarded.

Next, it is crucial to seek professional advice from a financial adviser or a pension specialist. They will be able to guide you through the process and help you understand the implications of the order.

They can also assist you in evaluating the options available to you, such as whether to transfer your share into a separate pension scheme or keep it within the existing scheme.

Share Your Pensions Without Spending Thousands

If you have negotiated a financial settlement with your ex-partner and require a legally binding court order drafted to finalise it, we have an affordable service that is ideal for you.

Typically speaking, high-street solicitors charge between £1500 – £3000 + VAT to draft a pension sharing order.

If you would prefer a service without the unnecessary bureaucracy that usually comes with local solicitors alongside an affordable fee, then view our service below for more information.

Consent orders play a pivotal role in formalising divorce settlements, including agreements related to pension sharing.

These legally binding documents outline the terms of the settlement, providing clarity and security for both parties involved.