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SIPP. SSAS. DB. PODE. DC. PSO. PAG1. If you've worked out that this is pension terminology, then you're ahead of 60% of the population. In a press release on 5 January 2026, the Money and Pensions Service identified that only 40% of UK adults can correctly identify that a pension could be part of a divorce settlement. This is a worry. Pensions are frequently one of the most valuable assets in divorce, typically the second largest asset in a marriage after the family home.
Since 1 December 2000, the Family Court has had the power to order that a pension be shared with a spouse. As the above research indicates, many spouses, usually the wife, are unaware of this and can consequently be severely prejudiced in divorce cases.
Pensions come in many shapes and sizes but share the same characteristics of being a hybrid asset, both a capital asset with a current value and an income stream for retirement. The court is required to take pensions into account when allocating resources on divorce regardless of whether the pension arrangement is in the husband or wife's name.
Pensions can be shared by agreement, which then has to be embodied in a Consent Order to take effect, or ordered by a court at the conclusion of contested litigation.
There are numerous procedural steps which have to be taken to make sure the court can make the right order, including obtaining up-to-date valuations of the pensions.
Every pension arrangement has to be disclosed by the parties to each other (and to the court) and a cash equivalent value (CEV) stated. That gives a capital value for the pension arrangement as at the date of the report.
For anything other than very simple pensions, it is recommended that a pension specialist (known as a PODE) be instructed to advise on how the pension or pensions should be shared. Typically, a PODE is instructed to advise on the appropriate percentage to be shared to produce equality of income in retirement.
Once the pension sharing order has been made by the court, it's then sent to the pension administrators to implement. They have four months to implement the pension share. Any growth (or diminution) in the value of the pension pot from the date of the court order through to the actual date of implementation will also be shared.
The actual percentage in which the pension will be shared is a question for the court when looking at all of the statutory factors, which include the duration of the marriage, each parties' age and earning capacity, contributions to the marriage (there can be no discrimination between financial and non-financial contributions) and future needs. The court is required to produce a result which achieves "fairness".
It is settled case law that a pension which is "matrimonial", so which has been built up during the marriage, should be shared equally between the parties. A pension which is part matrimonial and part non-matrimonial may be shared in different proportions. A pension which is 100% non-matrimonial may still be shared if the economically weaker party's financial "needs" require that.
But sharing a pension 50-50 is not the only possible outcome, as some divorcing parties prefer their share of the settlement to be in other asset classes, for example property, or more liquid forms of investment (bank accounts, ISA's etc.). This is because there are strict rules which apply to when pensions may be accessed, and tax complications which need to be understood.
Where a party to a divorce prefers assets to structure their share of the settlement in assets other than pensions, this is known as "offsetting". Whilst superficially attractive, offsetting isn't straightforward and frequently requires independent expert advice. The majority of professional negligence claims against family lawyers concerning pensions involve cases where offsetting has been the chosen remedy2. Beware the attraction of the simple solution.
A pension share can also provide immediate capital liquidity where the recipient is 55 (or older)3; under the so called "pension freedoms" which were introduced in 2015, up to 25% of a Defined Contribution scheme can be withdrawn tax-free.
The concept of pension sharing on divorce goes hand-in-hand with the court's obligation to provide a financial "clean break" between divorcing parties where that is possible. But sharing a pension doesn't mean that there'll be no spousal maintenance, particularly where there is an age discrepancy between the parties, which means that a younger party might not be able to access their pension investment for years down the line.
Pensions are frequently misunderstood at the best of times; during a divorce they can be particularly contentious. It is only now, some 25 years after pension sharing became possible, that there is an established body of case law and wider professional understanding of how pensions should be treated on divorce. The work of the Pension Advisory Group4 has been invaluable in establishing an independent, interdisciplinary guide to ensure consistency across the various professions for whom pension sharing is a daily issue.
Footnotes
1 Self-Invested Pension Plan; Small Self-Administered Scheme; Defined Benefit; Pensions on Divorce Expert; Pension Sharing Order; Pension Advisory Group.
2 PAG 2 (7.4)
3 Taxation of Pensions Act 2014; note that this age is rising to 57 in 2028.
4 The Pensions Advisory Group's Guide to the Treatment of Pensions on Divorce (Second Edition) runs to 192 pages.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
