Do I need to change my pension after a divorce?

07 June 2024

Written by Retirement Line Updated: 7th June 2024

Divorce can be a complex and challenging process. If you find yourself in this position then there will naturally be much to think about. One of those things will be how to divide your finances, including your pension. 

Your pension fund might be one of your most valuable assets, with one partner often holding a larger pension fund than the other. Agreeing with your ex how to fairly divide your pension savings is a crucial part of divorce or ending a civil partnership. 

Dividing pensions in divorce can be complex, so do contact a financial adviser or solicitor before you attempt to split a pension. However, we’ve put together the following overview of your main options, so you can better prepare yourself for the decisions that lie ahead.

• How are pensions split in a divorce?

• Divorce and annuities/drawdown

• Dividing my State Pension in a divorce

• Do I have to split my pension in a divorce?

• Getting free guidance on divorce and pensions

How are pensions split in a divorce?

When a marriage or civil partnership ends, you may choose to divide any personal or workplace pensions either of you have during the divorce proceedings. 

Importantly, it is not the divorce itself that makes decisions regarding your finances. It is a separate financial agreement or settlement that does this job. 

For pension schemes where you haven’t yet started taking an income, there are three main ways to divide pensions in a divorce as part of your financial agreement or settlement:

• Pension offsetting

• Pension sharing

• Pension attachment order / earmarking order

Pension offsetting

One option is to offset the pension value against other assets, such as the family home or savings. The partner without the pension may receive a larger share of other assets to compensate for not receiving a portion of the pension. This option may be good for you if you are looking for a clean and simple break.

For example, your ex might receive a bigger share of the family home in exchange for you keeping your pension.

Pension sharing

This is a more direct method of dividing pension assets. A percentage of the pension transfers from one spouse's pension to the other. Both spouses then have their separate pensions, so it’s another way to achieve a clean break.

Pension attachment order / earmarking 

Known as ‘attachment orders’ in most of the UK, this option involves assigning a portion of the pension income, the lump sum or both to the non-pension-holding partner upon retirement.

In Scotland this option is known as ‘earmarking’ but differs somewhat, as you can only get some of the lump sum in this arrangement.

Importantly, the payments to the non-pension-holding partner only start when the pension-holding partner chooses to receive their pension income. Also, the pension holder still controls the pension, so this is not a clean financial break.

See Moneyhelper’s guide to pension attachment and earmarking orders for more information. 

Make your own agreement

You can come to your own financial agreement to determine how you will divide your pension in a divorce. However, as this should be done in a formal and legal way you should take professional advice if you choose this option.

Divorce and annuities / drawdown

If you have arranged a pension annuity and divorce, you may be able to request that the provider ‘unwinds’ the annuity and calculates a pension credit. The cash equivalent can then be split out between you. 

The money would be paid into another pension scheme. This means you can buy another annuity with your share if you wish, or put the funds into a drawdown scheme, for example. 

If some of your pension fund is in drawdown and you divorce, then your funds can be split between you.

Once you know how much money you will get back from the annuity or drawdown scheme, you can work out how much income a new annuity will pay you. 

Dividing my State Pension in a divorce

How your State Pension will be affected by divorce or civil partnership dissolution depends on when you reach State Pension age: 

I reached State Pension age before 6 April 2016

If you were born before 6 April 1953 then you may have built up your State Pension entitlement under the basic State Pension. This can’t be shared if your marriage or civil partnership ends.

However, if your ex has enough National Insurance contributions then this can still boost your basic State Pension, without it impacting on their State Pension income. This is providing neither of you remarry or enter a new civil partnership before you reach State Pension age.

If you have an additional State Pension, the court could order that this is shared between you.

I reached State Pension age after 6 April 2016

Anyone reaching State Pension age after this date receives the ‘new’ State Pension, which can’t be shared following a divorce or civil partnership ending.

An exception might be if you have a ‘protected payment’, in which case this could be shared between you if the court rules.

Do I have to split my pension in a divorce?

Perhaps you built up a large percentage of your pension fund before you married? Or maybe the marriage has been a short one, so it might be deemed as unfair to divide the pension in half? In circumstances like these, having pension rights does not necessarily mean your ex has an entitlement to half of your pension. 

Also, there is nothing stopping you and your ex from deciding that your pensions won’t form part of a settlement. If this is what you both decide, make sure this is put in writing, for example in a financial consent order.

Getting free guidance on divorce and pensions

If you are thinking about divorcing, or dissolving your civil partnership, and would like some free guidance, there are a number of services available:

• The government’s free Money Helper website offers appointments to help you understand what divorce means for you, your pension and your other financial assets.

• Citizens Advice.

• Get help with your divorce application onGOV.UK

• Get help with your dissolution application on GOV.UK

Before you seek guidance on dividing your pensions for a divorce or civil partnership dissolution, it will help if you do a little preparation. Start by finding out the latest values of each pension that you hold. 

Both you and your ex-spouse or partner can request up-to-date statements for all of your money purchase (defined contribution) workplace and personal pension plans. This includes self-invested personal pensions (SIPPs) and stakeholder pensions. In addition, you should find out the cash equivalent transfer value (CETV) of any final salary (defined benefits) pensions you have.It will also help if you can find a copy of the scheme rules for each pension.