How to protect your pension in a divorce

A divorce can be both emotionally and financially challenging. To obtain the right division of marital assets is essential, both for your immediate situation and your long term financial security. As one of the most valuable assets most of us own and a key part of your future financial planning, a pension is often a massive concern for those experiencing a divorce.

There are many different types of pensions that must be considered, including personal pensions and employer pensions. In this blog, we look at the most commonly used option for protecting a pension during divorce, as well as the other ways a pension might be dealt with. We will also cover the different methods used to decide how pensions are dealt with in divorce and which is the best for protecting your pension.

Please note: while we wish for this blog to be helpful, it is intended for general informational purposes only. No two divorces are alike, so for specific advice tailored to your situation, please get in touch and we will be happy to help.

Using pension offsetting to protect your pension in divorce

The most common approach to protect a pension in divorce is pension offsetting. This means allowing your spouse to have a larger share of other assets (e.g. the family home) in exchange for renouncing their claim over a share of your pension.

Pension offsetting allows you to keep your pension intact, which may be the best option for your future. However, it is important to carefully weigh up the risks before agreeing to this. Something to bear in mind is that economic conditions change and the income from your pension may not be as high as you are anticipating.

Therefore, in some cases, it may be more sensible to let your spouse have a share of your pension pot rather than give up a larger share of other assets in the ‘matrimonial pot’.

Alternatives to pension offsetting for dealing with pensions in divorce

Pension sharing

This involves giving your spouse a share of your pension pot to place into their own separate pension. While this will reduce the value of your pension, this might be the best financial decision overall, depending on the value of your other shared assets.

Pension earmarking

This means your spouse will get a percentage of the pension income on an ongoing basis once it kicks in. This option is rarely used as it requires you and your spouse to remain linked financially even after your divorce.

Methods for deciding the division of pensions in divorce

Alternative dispute resolution

One of the best ways to protect your pension during a divorce is to negotiate a settlement with your ex-spouse. This means that you stay in control of how assets are divided, so you can prioritise the assets you want to protect, such as your pension.

Depending on your circumstances, you may want to negotiate directly with your spouse or via your lawyers. You can also use methods such as mediation (working with a trained, neutral mediator to agree a settlement) and collaborative law (where you, your spouse and your lawyers have a four-way ‘round the table’ meeting to negotiate a settlement).

Pension Sharing Orders

If you cannot agree a settlement, you may need to apply to a court to decide how your pension and other assets are dealt with. The court will make a Financial Order, setting out how your finances should be divided and this may include a Pension Sharing Order, setting out how your pension should be split.

It is important to note, however, that if you are under the age of 55, you will receive a Deferred Pension Sharing Order, which will only come into effect once you reach 55.

Speak to our divorce solicitor in Clapham regarding your pension

Our divorce solicitor in Clapham  will carefully listen to the circumstances relating to your divorce and your pension. We can then provide empathetic, practical advice that is tailored to achieve the best possible outcome for you.

Our firm is headed by Donna Goodsell, a highly skilled family law solicitor with over 25 years’ experience. Donna is available to provide a highly personal service in relation to divorce settlements, including pensions.

To speak to us about dealing with pensions in divorce or to arrange an initial consultation, please call 
020 7622 2221, email enquiries@goodsellssolicitors.co.uk or complete our online enquiry form to request a call back.