PensionsJan 3 2023

Do not neglect pensions in divorce settlements

  • Describe the issues with pension sharing on divorce
  • Explain when an Pode is required
  • Explain how pensions are distributed on divorce
  • Describe the issues with pension sharing on divorce
  • Explain when an Pode is required
  • Explain how pensions are distributed on divorce
pfs-logo
cisi-logo
CPD
Approx.30min
pfs-logo
cisi-logo
CPD
Approx.30min
twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
pfs-logo
cisi-logo
CPD
Approx.30min
Do not neglect pensions in divorce settlements
Photo: Karolina Grabowska/Pexels

It is an odd line of work being a divorce lawyer. 

We are here to advocate the best result for our clients who are very often understandably rather bitter about their soon-to-be former spouse. Emotions can run high (and that is just the clients). 

One theme that crops up time and again is not wanting to leave the relationship with less than what is seen as ‘fair dues’.

A pension earned by one party during the marriage will be treated as being the joint fruit of the matrimonial partnership.

It would be anathema to the typical client, for example, to let their ex take a £1mn property without having half of the value for themselves. 

Yet that is precisely what we see happening repeatedly with pensions, particularly when we are called in late in the day – or worse, after the event (the financial settlement) – and asked to make good what is, at heart, a bad job.

There are probably various reasons behind pensions being neglected in financial settlements. Fundamentally, they all boil down to the same reason: a lack of appreciation of their true value.

Pensions are often the largest assets held by divorcing couples, often exceeding the equity in property or a business. Yet they are often overlooked. 

What we regularly hear from clients, typically wives, is that they see their husband’s pension very much as being ‘his, because he’s earned it’.

We could not disagree more: the basis of our courts’ approach to division of assets upon divorce is that what is earned during the marriage falls in the first place to be shared equally between the spouses.  

In other words, a pension earned by one party during the marriage will be treated as being the joint fruit of the matrimonial partnership and thus be divided equally between the parties on their separation. This is all subject to any overriding ‘needs’ argument. 

Research conducted by Hilary Woodward alongside Mark Sefton in 2014 (carried out on behalf of the Nuffield Foundation) found:

  1. In 20 per cent of court file cases examined within the study, neither party disclosed any pension other than a basic state pension.
  2. In 66 per cent of cases, one or both parties disclosed a pension other than basic state pension but no pension order was made.
  3. In just 14 per cent of cases examined within the study a pension sharing order was made. 

The report also noted:

PAGE 1 OF 4