Pensions and Divorce in the UK: A Complete Guide to Splitting, Sharing and Protecting Your Pension

How UK courts treat pensions on divorce

Under English law, pensions are matrimonial assets. Section 25 of the Matrimonial Causes Act 1973 sets out the factors the court must consider when dividing finances on divorce, and it expressly requires the court to look at the value of any benefit either party will lose the chance of acquiring. That includes pensions. As part of dividing up the finances on a divorce, all the assets need to be ascribed a value so that they can feature on an asset schedule and pensions are no different. The starting point in financial remedy proceedings is the total asset schedule: capital, property, business interests, savings, and pensions. Pensions sit alongside properties, bank accounts, ISAs investments, trust interests, debts, etc. They have a huge role to play in a divorce and can often be used as a very powerful negotiating tool.

The court has three separate statutory powers to deal with pensions. A pension sharing order, pursuant to section 24B of the Matrimonial Causes Act 1973, transfers a percentage of one spouse’s pension into a pension in the other’s name. A pension attachment order, under sections 25B to 25D, directs the pension provider to pay a percentage of the income or lump sum to the other spouse when it crystallises. Offsetting is not a statutory power, but it is a commonly used approach: one spouse keeps their pension in full and the other receives an equivalent value from other assets. This is why valuable pensions are often a useful negotiating tool – if someone wants to retain their pension but it is very valuable, then it means other party may well have to receive more of the “other” assets to be bought out of a pension share they may otherwise be entitled to. This is not a straight-forward exercise and underscores the importance of getting specialist advise from a Pensions on Divorce Expert.

Since the Welfare Reform and Pensions Act 1999 came into force in December 2000, pension sharing has been the preferred mechanism in most cases. Attachment orders are now rarely used. Offsetting remains widespread, particularly where the non-pension holder wants liquid capital, such as a larger share of or outright retention of the family home.

The three ways pensions are divided

Pension sharing is the only order that delivers a clean financial break, being the severance of financial ties between spouses. A percentage of the pension, known as the pension credit, is transferred from the member spouse’s pension into an arrangement in the name of the other spouse. This can be done by way of an internal transfer (so the receiving spouse becomes a member of the gifting spouse’s scheme in their own right) or externally (whereby the receiving spouse nominates a different pension scheme to receive the pension credit). This is usually the simplest and fairest outcome, particularly in long marriages and where pensions make up a significant portion of the matrimonial pot.

Pension offsetting leaves a pension intact. It is not shared and retained by the spouse who is the member of the scheme. The quid-pro-quo is that they have to “buy-out” the other spouse’s notional share in the pension, which can be substantial if a big pension was generated during the course of a long marriage.  This buy-out of “offset” is often achieved by the non-receiving spouse retaining more liquid capital, such as cash in the bank, investments or the family home.

The appeal is obvious: one party keeps their pension untouched, the other receives immediate capital. The difficulty lies in valuation. A pound of pension is not the same as a pound of cash. The former is illiquid, taxable on drawdown, subject to longevity risk and market fluctuations, and its growth profile differs materially from property or cash in hand. PAG2 recognises that offsetting is a popular option for divorcing couples but cautions that it is often done by reference to crude and inconsistent valuation methodologies.  Whilst PAG2 recognises  the utility of Galbraith Tables (actuarial tables to assist with offsetting) as a starting point they are only that – they are not an answer and should be used with caveats.  Getting the offsetting calculation wrong can see the spouse giving up a share in a pension losing being seriously short-changed.

Pension attachment, sometimes still called earmarking, is the third option and now the least used. It contravenes the “clean break” principle that every court is under a duty to try to achieve, if possible, on a divorce. It directs the pension scheme to pay a percentage of the member’s pension income or lump sum to the other spouse when they are drawn. It does not create a separate pension. The recipient remains dependent on the member living, retiring, and drawing benefits, and the payments end on the remarriage of the recipient. For most couples, attachment is the wrong tool. It is occasionally used in narrow circumstances, for example where a scheme cannot be shared for scheme-specific reasons.

In my experience it remains the case that many wives prefer cash today rather than a pension tomorrow. However, each case turns on its own facts, and it is important that any party, be that male or female, the spouse with the pension or without one, takes independent financial advice about how they want their finances to work for them post-divorce. I have been practising family law for more than a decade and I have yet to see a pension attachment order made.

Valuing a pension for divorce

It is important to have a clear and recent valuation of a pension before it is divided. The starting point is the Cash Equivalent Transfer Value, or CETV. For defined contribution pensions, the CETV is close to the fund value and is generally a reliable figure. For defined benefit pensions, the CETV is far less reliable.

The CETV  is calculated using actuarial assumptions set by the scheme, and it often understates the true value of the benefits that spouse would have received at retirement. This is particularly the case in schemes where the pension may arise from, for example, an NHS pension. Relying on CETVs alone in defined benefit cases is one of the most frequent errors in divorces because it risks substantially undervaluing the true value of the pension’s benefits. .

This is where the Galbraith Tables, launched in April 2022 by Jonathan Galbraith and Christopher Goodwin of Mathieson Consulting, have become useful. The Galbraith Tables provide a ready-reckoner estimate of the gross value of a defined benefit pension by reference to the benefits promised and the age of the member. PAG2 gives the Tables a cautious welcome as a useful starting point, particularly in offsetting analyses where a formal actuarial report may not be proportionate. They are not a substitute for a full expert report, but they raise the quality of early-stage negotiation considerably.

For anything beyond the straightforward, a Pension on Divorce Expert (PODE) should be instructed. PAG2 identifies the types of case where a PODE is usually needed: public sector defined benefit schemes, low-value pensions with guaranteed benefits, combined defined benefit pots over £100,000, and any case where the parties are seeking to separate pre-marital contributions from matrimonial pension accrual. A PODE is a regulated actuary or financial adviser who produces an expert report on valuation, equalisation of income or capital, and the implications of different sharing percentages. In most cases, the cost of a PODE is modest relative to the value of the pension at stake.

Having represented a number of NHS doctors, dentists and other professionals over the years, I have seen firsthand how the true value of such schemes are only revealed once a PODE has provided their report. Many people shy away from instructing a PODE – they see it as an unnecessary cost or worry that it adds delay to proceedings. More often than not, that delay and cost could well be worth it if you are seeking to share in a valuable pension, or are bought out of your share in it by way of offsetting.

Defined benefit and defined contribution pensions

The treatment of a pension on divorce depends heavily on what kind of pension it is. Defined contribution pensions, sometimes called money purchase, personal, or stakeholder pensions, work like an investment pot. Contributions are paid in, invested by the provider, and the fund value at any given time is a reasonably reliable measure of what the pension is worth. Sharing these pensions is relatively straightforward. The CETV is broadly accurate, and the mechanics of the pension credit are well established.

Defined benefit pensions are a different proposition. These schemes, which include most public sector pensions and older private sector arrangements, promise a specific income in retirement based on salary and length of service. Their true value is often far greater than the CETV suggests, particularly for long-serving members of final salary schemes, NHS schemes, Teachers’ Pensions, the Civil Service Pension Scheme, and the Armed Forces Pension Scheme. The McCloud remedy, which concerns public sector schemes and the treatment of members moved to career-average arrangements, adds a further layer of complexity in cases involving 2015 scheme members.

In any case with a significant defined benefit element, expert input is almost always needed. The risks of undervaluing a defined benefit pension, and by extension agreeing a settlement that short-changes one spouse, are high. The decision in W v H [2020] EWFC B10 was one of the early cases to rely expressly on PAG guidance in resolving the treatment of defined benefit pensions, and the principles have been reinforced in the judgments that have followed. For high-net-worth cases with multiple pensions, including SIPPs and SSAS arrangements, the valuation exercise is more intricate still and should be led by a specialist.

No two pensions are ever the same, be that as a result of the nature of the scheme or the assets held within them. In a recent case I was involved in with assets in excess of £50m, one of the parties had two very non-traditional pensions – a SIPP (self-invested personal pension) that owned a number of properties and a SSAS (small self-administered scheme) that held a number of shares and other investments. The unusual nature of these pensions and the assets held within them meant that for my client to receive their fair share of the assets it was essential that a PODE be appointed to ensure fair treatment to both parties.

What Standish v Standish [2025] UKSC 26 means for pensions

The Supreme Court’s decision in Standish v Standish [2025] UKSC 26, handed down on 2 July 2025, is the most significant development in financial remedies for years, and its implications for pensions are substantial. The court confirmed that the sharing principle, which presumes equal division, applies only to matrimonial property. Non-matrimonial property, including assets acquired before the marriage or by gift or inheritance, is not subject to the sharing principle, though it may still be drawn on to meet needs.

Standish did not concern pensions directly. The dispute revolved around the treatment of approximately £80 million of investment assets transferred from husband to wife as part of an inheritance tax planning exercise. But the reasoning applies to assets across the board, pensions included. Pensions built up before the marriage now sit more clearly outside the sharing principle unless something during the marriage converted them into matrimonial property. That conversion, known as matrimonialisation, depends on how the parties treated the asset over time, not just on whose name it was held in. This is, of course, subject to needs being met.

The practical result is that pre-marital pension accrual will receive closer scrutiny than it did five years ago. This was already the direction of travel. In SP v AL (PL and another intervening) [2024] EWFC 72(b), HHJ Hess addressed the exclusion of pre-cohabitation pension accrual in the context of PAG2, noting that in some cases it may be appropriate to remove the non-matrimonial element from the sharing claim, though in needs cases the source of the saving carries less weight. Standish has now sharpened that approach at the highest level. For anyone with significant pension savings accrued before marriage, the message is clear: keep records, avoid co-mingling, and take advice early. The burden of showing an asset has been matrimonialised now rests with the spouse seeking to share it.

Even though we live in a world of information that can be accessed at the push of a button,  a lot of people are still unaware of the implications of the Standish judgment – and why wouldn’t they be? Detailed knowledge of developments in the law is for the lawyers to advise their clients of accordingly. However, in order to avoid what can often be a complicated exercise following a marriage breaking down to trace assets that you had prior to the marriage in order to exclude them from sharing, more and more people are turning to pre-nuptial agreements so that there is a clear and contemporaneous record of (i) what asses existed prior to the marriage, (ii) how those assets would be treated on a divorce and (iii) what each party’s respective claims over assets built up during the marriage will be treated if the marriage ultimately breaks down.

Protecting a pension on divorce

The most effective way to protect a pension is to plan before the marriage, not after it has broken down. A properly drafted pre-nuptial agreement, and where one already exists, a post-nuptial agreement, can set out how pensions will be treated if the marriage ends. English courts are not bound by nuptial agreements, but since Radmacher v Granatino [2010] UKSC 42 they will give decisive weight to an agreement that was freely entered into by both parties, with a full appreciation of its implications, where holding the parties to it would not be unfair in the circumstances prevailing at the time of the divorce. Whilst the decision in Radmacher is coming up to 16 years old, the message is the same and, if anything, even stronger now following a raft of successive decisions in the family court about how such documents should be treated.

For pension protection specifically, an agreement should record the pension values at the date of marriage, set out how pre-marital accrual will be treated, and address what happens if the marriage ends. Further information on nuptial agreements is available on our dedicated page.

Beyond nuptial agreements, the practical steps worth taking in any marriage include keeping statements and CETVs at key dates, avoiding the co-mingling of pension savings with joint funds, and being cautious about transfers between schemes during the marriage. Where a pre-marital pension is moved into a different provider mid-marriage, that move can complicate any later argument that it remained non-matrimonial.

A final word

Pensions are too often treated as a technical afterthought in divorce when they are, in fact, among the most valuable elements of the financial settlement. Getting the valuation right, choosing the correct remedy, and understanding the implications arising from the PAG2 report can mean a materially different outcome. If your financial picture includes significant pension assets, taking early specialist advice is always the right first step.

To discuss pensions and divorce with a specialist at Payne Hicks Beach, please visit our Family Law page or call 020 7465 4300.