Do you split a pension when divorcing?

If this route is the best option for you, you will get a Pension Sharing Order as part of your financial settlement.

This means that you get a percentage share of any one (or more) of your spouse’s/civil partner’s pensions. This share will be transferred into a pension in your own name. You can either be kept as a member of the fund that is being shared, or the share can be transferred out into an alternative fund.

Some schemes (such as the main public sector schemes like the NHS) require you to remain a member of that scheme, while others do not permit this and require a transfer out. Other schemes will offer an option so you can choose which is best for you.

There may be better benefits available from the pension if you are allowed to remain a member of your spouse’s scheme. If the pension is transferred to you, and you don’t already have your own pension, you’ll have to set one up.

An independent financial adviser will be needed to assist with this and advise as to what the best option is for your individual circumstances.

Pension sharing on divorce can only be achieved through a court order, known as the Pension Sharing Order. This order sets out how much of the pension(s) will be given to you or your ex-spouse and can only be made when your divorce or dissolution is complete through the court pronouncing a final order.

If you have a Pension Sharing Order, you will receive a transfer of a percentage of the pension into a new pension fund in your name. You will then be able to draw funds from that – whether as income or lump sums – in accordance with the rules of the scheme and subject to any tax payable.

Pension sharing orders mean that even if the paying spouse dies, the pension sharing will be unaffected.

Pension offsetting is where one of the parties will retain a greater share of another asset, instead of receiving a share of the pension.

For example, you might get a bigger share of the family home while your ex-spouse keeps their pension.

However, it is very important to recognise that it is not an easy exercise to compare the value of a pension – which is usually a future income stream – against the value of a property or money you have in the bank which are immediately available to you.

Additionally, the figures that many pension funds provide for an immediate capital value of the pension can be misleading and so advice from a lawyer and financial adviser is always required before agreeing to an offset of pensions.

Pension offsetting is only possible if there are enough non-pension assets that can be used in an offsetting exchange.