What is a pension sharing order?
A pension sharing order is a court order that divides a pension between divorcing parties. It specifies a percentage of one party's pension that is transferred to the other party as a pension credit. The recipient can transfer that credit into their own existing pension or a new one, or remain in the same scheme as a separate member (where the scheme rules allow).
Once implemented, both parties have their own independent pension entitlement. There is no ongoing link between the parties, it is a clean break in relation to the pension.
Pension sharing vs pension offsetting: what's the difference?
| Pension sharing | Pension offsetting | |
|---|---|---|
| What happens | A percentage of one party's pension is transferred to the other as a pension credit | One party keeps their full pension; the other receives a larger share of another asset (e.g. the house) instead |
| Clean break? | Yes, both parties have their own pension | Yes, but one party has no pension |
| Complexity | Higher, requires pension sharing annex, actuarial input for DB pensions, scheme implementation | Lower, but requires careful comparison of pension and asset values |
| Risk | Both parties carry their own investment/longevity risk going forward | The party who takes the house instead of the pension may be worse off in retirement |
| Suitable for | Significant pension imbalances where offsetting is not feasible | Cases where one party prefers immediate capital (e.g. the house) and the pension imbalance is manageable |
When is a pension sharing order appropriate?
Pension sharing is most commonly used where:
- There is a significant imbalance in pension values between the parties that cannot be adequately addressed through offsetting
- One party, typically the primary carer, has little or no pension of their own after a long marriage
- The pension holder has a defined benefit or public sector pension with a very high CETV that dwarfs the other assets
- Both parties want a complete financial clean break with no ongoing financial interdependence
For defined benefit and public sector pensions, specialist Pension on Divorce Expert (PODE) advice is usually essential before agreeing any pension sharing order.
What happens after a pension sharing order is made?
Order sealed and served on pension scheme
Once the consent order (including the pension sharing annex) is sealed by the court, a copy must be served on the pension scheme. The scheme then has a period in which to implement the order.
Pension scheme implements the order
The pension scheme has up to four months from receipt of the order (or the final order in the divorce, if later) to implement the pension sharing. For complex defined benefit schemes, this process can take the full four months. Some schemes charge an implementation fee.
Recipient transfers or stays in scheme
The recipient of the pension credit can choose to remain in the original scheme as a deferred member (where the scheme rules allow) or transfer the credit to another approved pension scheme. Most financial advisers recommend taking independent pension advice at this point.
Both parties have their own pension
Once implemented, the pension sharing is complete. Both parties have their own independent pension entitlement. The original holder's pension is reduced by the percentage ordered; the recipient has a new pension in their own name.
Do you need a Pension on Divorce Expert?
For straightforward defined contribution pensions of modest value, an actuarial expert may not be essential, the CETV is close to the fund value and sharing it by percentage is relatively simple. However, for:
- Defined benefit (final salary) pensions
- Public sector pensions (NHS, teachers, civil service, police, armed forces)
- Cases where the pension imbalance is very large
- Cases where there is doubt about the reliability of the CETV
…a Pension on Divorce Expert (PODE) report is strongly recommended and sometimes directed by the court. A PODE is a specialist actuary who provides an independent report on the pension values and advises on what percentage share would achieve equality or the agreed outcome. The cost is shared between the parties and typically runs to £1,500–£4,000.
Need to understand your pension position?
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