Pensions are often dealt with as part of the financial settlement on divorce or separation. Please see our 'Financial Claims on Divorce' leaflet.

A pension is a future asset of a party as well as a future source of income, and as such will be taken into account on a financial settlement.

A pension scheme’s Cash Equivalent Transfer Value or CETV is used in pension calculations. This is the amount of the fund needed to provide the pension in the future. The CETV is not treated in the same way as the property, a lump sum, or current asset of a party. It needs special consideration.

The administration of pension schemes is often very complicated and so a specialist independent financial advisor is usually used to deal with the actual arrangements.

Pensions can be taken into account in ancillary relief proceedings under section 25 Matrimonial Causes Act 1973 in the following ways:

This is only available for divorce proceedings started after 1st December 2000. This is where part of one party’s pension is taken away and given to the other. A separate pension fund is then set up in that person’s name. In this way, each party will both have an entirely separate pension fund.

This is where one party is compensated for the loss of pension rights by giving them a larger portion of the other assets. For example one might keep the property, and the other keeps their pension.

This is where the pension remains in one party’s name however part of it is ring fenced for the other party. In this way when the pension becomes payable the other party will receive some of the payments.

Until 1st December 2000 earmarking was the only way a pension could be shared. Earmarking has one major disadvantage in that it is dependent on one party’s pension rights. Therefore if they decide to delay receiving their pension until they are 67, for example, then the other party will also not receive any payments until then.

Currently, in most cases the pension is dealt with by pension sharing or off setting.