Pension Rights on Divorce

A basic formula is used to work out the value of the pension to be taken account of when deciding how much of the pension is counted as part of the assets accumulated during the marriage (known as the matrimonial property). The formula is:

A (the number of days of marriage) ÷ B (the number of days the pension has been accumulated over) x C (the cash equivalent transfer value of the pension at the date of separation)  

So for example, if you have been married for 12 months and the pension has been paid for 24 months and the transfer value of the pension is £1,000 at the date of separation, the calculation is 12/24 x £1,000 = £500 treated as matrimonial property.

If there are sufficient assets accumulated over the course of your marriage, then your pension may be offset against other assets which have been acquired. For example, if at the date of separation you have a pension and a jointly owned home with your spouse and, your pension is valued at £200,000 and the jointly owned matrimonial home is worth £400,000, then the total value of the pot of assets is £600,000.  If you are to keep all your pension rights, and the matrimonial home is to be sold, then you would get £100,000 from the house sale proceeds with your spouse having the remaining £300,000. 

If the only asset that has accumulated over the marriage is either your own pension or your spouse’s pension, then the pension can be subject to pension sharing or earmarking. 

With pension sharing, the individual gets a percentage of their ex-partner’s pension transferred to them. With pension earmarking, they get some of their ex-partner’s pension but only when it starts being paid to the ex-partner.

In Scotland, only the lump sum payment which is part of the pension can be earmarked and so there is only a proportion of the pension that is available for division.

A pension sharing order, however, can provide an income stream for the spouse who is to receive it.

It is absolutely essential that you take proper financial advice on whether or not a pension sharing order is appropriate for you. There are many factors that will affect whether or not a pension sharing order is going to be of most benefit to you and only a suitably qualified financial advisor can help you with that. They will also help you decide whether a pension can or should be left within the scheme or transferred into a different type of scheme or pension arrangement.

This will very much depend on the scheme which your spouse’s pension is invested with and whether or not your own pension scheme will accept a transfer.

Pension sharing can be quite expensive and can cost upwards of £1,000.

The pension is shared after divorce but it is absolutely essential that a properly drawn up pension sharing arrangement is in place before you are divorced. The pension sharing arrangement should be sent to the administrators of the pension fund that is to be shared within two months of divorce being granted. There are very strict guidelines and these must be followed if a pension sharing arrangement is to take effect.

Yes. You can find out the value by contacting the State Pension Service and completing form BR20