When couples separate, attention often focuses on the family home or savings. However, as discussed in this episode of Whitehead Monckton’s HeadNotes podcast, pensions on divorce can be one of the most valuable assets within a marriage and should never be overlooked during a financial settlement.
Family law solicitor Emma Palmer is joined by chartered financial planner Simon O’Connell from Evelyn Partners to explain how pensions and divorce are approached in England and Wales, the different ways pensions can be divided, and why specialist legal and financial advice is often essential.
Whether you are just beginning the divorce process or negotiating divorce settlements, understanding how pensions on divorce are treated can make a significant difference to your long-term financial security.
Many people assume that the house is the most valuable asset when a relationship ends and they are considering finances on divorce. However, as Emma and Simon explain throughout the podcast, this is often not the case.
For couples who have built up substantial workplace or public sector pensions, the value of a pension can exceed the value of the family home. This makes pensions an important consideration when negotiating a financial settlement following a marriage or civil partnership.
Ignoring pensions or treating them as an afterthought can have lasting consequences, particularly for the spouse who may have lower earnings or fewer retirement savings.
“Pensions can often be one of the most valuable assets of a marriage.” — Emma Palmer
The discussion begins by explaining that there are two main categories of pension. Because every pension scheme operates differently, understanding exactly what type of pension is involved is an important first step.
Defined benefit pensions, commonly found in the NHS, teachers, police and armed forces, provide a guaranteed income in retirement based on salary and length of service.
Defined contribution pensions, including many workplace and personal pension arrangements, build up a pension pot through contributions and investment performance. The eventual retirement income depends on how the fund performs over time.
A pension sharing order is now the most common approach. A percentage of one person’s pension is transferred into a pension in the other person’s name, allowing both individuals to build independent retirement benefits.
As Simon explains, this creates a clean break because each person has control over their own pension moving forward.
Although pension attachment orders (previously known as earmarking order arrangements) remain available, they are used far less frequently today.
Unlike pension sharing, they do not provide a complete separation because payments remain linked to the original pension holder and can be affected by future events.
Pension offsetting involves one person retaining more of another asset, such as the family home, instead of receiving part of the pension.
While this can sometimes be appropriate, the speakers explain that it should be approached carefully because a house and retirement income are very different assets.
“You’re trading an income in retirement for a capital asset.” — Simon O’Connell
One of the key themes throughout the discussion is the growing role of the pensions on divorce expert, often referred to as a PODE.
These specialists analyse pension arrangements, identify the true value of different pension schemes and recommend how pensions should be divided fairly.
A PODE does not advise either party individually. Instead, they provide an independent expert report to assist the court and the parties involved.
The speakers explain that a report may be particularly valuable where:
However, they also explain that not every case requires a PODE. In some straightforward cases, where both parties have similar pensions, additional expert reports may not be necessary.
The podcast also discusses guidance produced by the Pension Advisory Group (PAG), which has significantly influenced how family lawyers approach pensions.
Rather than simply comparing pension values, PAG encourages professionals to focus on achieving fairness by considering future retirement income.
The guidance also highlights situations where expert reports should be considered and discourages unnecessary use of pension offsetting where it could disadvantage one party over the long term.
The conversation highlights that obtaining a pension sharing order is not the final step.
Once an order has been approved by the court, further work is often required before the pension transfer is completed. Pension providers have their own administrative processes, and the recipient may need professional advice about where their pension credit should be transferred and how it fits into their wider retirement planning.
Starting this process early can help avoid unnecessary delays and ensure the pension settlement is implemented as smoothly as possible.
Understanding pensions during divorce can be challenging, particularly where valuable pension schemes or complex financial arrangements are involved.
Our experienced family law solicitor team works alongside trusted financial professionals where appropriate to help clients understand their options and achieve fair outcomes.
We can assist with:
If you would like specialist advice about pensions during divorce, our family law team is here to help.
No. While a pensions on divorce expert can be invaluable in complex cases involving valuable or multiple pensions, simpler cases may not require a specialist report.
Sometimes. This is known as pension offsetting, but it should only be considered after taking professional legal and financial advice because property and pension assets are not directly comparable.
Family law solicitor at Whitehead Monckton, specialising in financial arrangements following divorce, collaborative law and modern approaches to family dispute resolution.
Chartered Financial Planner at Evelyn Partners, specialising in financial planning and pension advice for individuals navigating divorce.
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