Each divorce is considered on a case-by-case basis, and there are several methods of dividing a pension on divorce. Find out more in our article How are pensions shared on divorce?
Pension offsetting: In this scenario, the value of the pension is offset against other assets, such as the family home. This could mean, for example, that you receive a larger share of home in exchange for no entitlement to your ex-spouse’s pension, or a smaller proportion of it. It’s only possible if there are other major assets that can be offset against the pension.
Pension sharing: This is when pension benefits are split when you divorce, and usually, the partner without or with a small pension receives a share of their partner’s benefits in their name, to equal the projected pension income in retirement. The share you receive may be kept in the pension scheme, or moved to a new pension, but it depends on the scheme rules. This option enables a clean break, with each party clear on how much pension is being given up and received.
Pensions attachment order, also known as ‘earmarking’: This option is increasingly rare. However, in this case, you receive some of your ex’s pension when they retire and it is paid to them. This could be paid as an income, lump sum or both, but in this scenario you cannot start receiving pension payments until your ex starts taking pension benefits. Therefore, it can be difficult if you’re older and relying on pension payments for your own income.
This option could also mean you have to wait until your ex-partner retires or dies to receive a share of pension benefits, and you have no control over how this money is invested, and may receive less than expected.