Are you feeling overwhelmed with all that comes with going through a divorce? 

Now you have one less thing to worry about once you understand your pension rights after divorce. 

We’ve taken the time to research your options and provide you with all the information you need to make well-informed decisions about managing and protecting your pension in a divorce.

Let’s get into answering the questions you may have about your pension rights after divorce…

Pension Vs State Pension

There’s a difference between a pension and a state pension. 

Let’s take a closer look.

What’s Pension? 

A pension is a fund you contribute to so that you have a source of income later in life¹. This form of saving for retirement has proven to be more tax-efficient, as pension funds are exempt from income tax².

There’re a number of pension funds and schemes that you can contribute to. 

These funds also differ in how much you can put in and who’s allowed to contribute. 

Important to note

The types of pension available are the state pension, workplace pension, and personal pension. 

Each type also has different rules, such as if only you’re allowed to contribute, or if others like your family members or employer can, too. 

The state, too, contributes in the form of ‘tax relief’. 

Did you know?

Pensions are sometimes invested in shares and stocks. Because investments fluctuate, you may not always get the exact amount that you have paid for your pension fund. 

This means that sometimes you may receive less than what you have contributed over the years. 

Tax is also deducted from this amount; the portion depends on your individual circumstances. 

What’s State Pension?

A state pension is a pension fund that is provided by the state³. 

Once most people reach retirement age, they’re then eligible to collect regular state-funded pensions. 

In some cases, you may not qualify for a state pension if you haven’t paid an adequate amount of National Insurance contributions⁴. 

The age at which you can start claiming can vary, and the amount you qualify for depends on how many qualifying years of National Insurance payments you’ve made. 

Turns out

You don’t need to be unemployed to collect a state pension; you can continue paid work or voluntary work and still be eligible. 

The money you earn after retirement won’t interfere with your state pension fund; however, it may affect other benefits.   

Can I Protect My Pension Against My Ex-partner?

Yes, you can protect your pension against your ex-partner. This must be done during the divorce settlement. 

You can do this by adding your financial agreement to a consent order approved by the court⁵. If this isn’t done you have no legal protection over your pension in the future. 

Pension offsetting⁶ is the best option for you if protecting your pension is your primary goal. 

Do I Have to Split My Pension in a Divorce & How’s it Calculated? 

Yes, in most cases you do have to split your pension in a divorce unless you have a consent order in place that protects your pension in a divorce.

Most of the time, for fairness, all funds, and assets, including pension, are split 50/50. 

This ratio can be adjusted in each case to ensure fairness is achieved. 

Best of all is

Pensions aren’t considered in a divorce if both parties have their own pension funds and agree to leave them as they are. 

In other instances, a pension fund is split according to the following; 

Pensions Offsetting

Pension offsetting isn’t a means of splitting your pension at all. It’s a method of offsetting the value of your pension against other assets⁷. 

This means that instead of splitting your pension with your ex-partner, he or she would receive a larger portion of other assets in exchange for the value of your pension.

Pension Sharing Order

A pension sharing order is a legal agreement to split the pension during the divorce⁸. The split doesn’t always have to be 50/50; the court decides on the portion. 

Essentially, a portion of your pension will be transferred into your ex-partner’s name at the time of divorce. 

You see

This form of pension split is known as a ‘clean break’, as both of you will know the exact value of the payout in the divorce agreement. 

Both of you will still be held liable for taxes on your portion of the fund. 

Deferred Pension Sharing (Not Scotland)

Deferred pension sharing applies to those who may already be receiving money from their pension fund. 

Through a court order, you can opt to begin sharing your pension at a later time. 

In the interim, you’ll need to pay maintenance to your ex-partner until you’ve reached a settlement. 

This ensures that you don’t suffer an immediate reduction in the amount you’re receiving.

The maintenance allows your ex-partner to be compensated until they’re of retirement age and entitled to receive their portion of the pension fund. 

Pensions Attachment (“Pensions Earmarking” in Scotland)

Pension attachment is when a portion of your pension fund is kept aside for your ex-partner, but they’ll only start to receive payments once you qualify for retirement. 

Deferred Lump Sum (Not Scotland)

A deferred lump sum is when the court orders you to pay your ex-partner a portion of your tax-free pension fund in the form of a lump sum upon retirement. 

An Individual Agreement

In an individual agreement, the divorce is solely handled by the couple without the involvement of the court. 

The agreement should then be made into a legal document, and advice on this route is strongly advised. 

Consent Order

A consent order is a legal document recording an agreement between parties. Once approved by the court, it becomes legally binding, and any appeal should be taken up in court. 

Having a consent order in a divorce protects you from any further claims that could be brought against you in the future⁹.

Understanding Financial Agreements After Divorce

It’s important to understand financial agreements and what happens in cases where pensions are taken out and contributions are made before marriage or after a divorce.

What if I Accrued My Pension Before My Marriage?

If you accrued your pension before marriage, it’s generally not split during a divorce.

However, the court may see fit to add it to the asset split in the financial settlement. It depends on the length of the marriage and the overall value of the pension. 

What does this mean?

The longer the marriage, the more likely the court is to add your pension into your financial settlement and grant a portion to your ex-partner. 

If your pension is of a substantial amount, and you have accrued a large sum of it, the court will divide it into non-matrimonial and marital assets¹⁰. 

What if I Contributed to the Pension After My Divorce?

An ex-partner trying to claim funds that you have contributed to your pension after a divorce is a common issue. 

The logic is that an ex should only be able to claim contributed funds during a marriage. 

You see

A court will often grant an ex-partner access to contributions made after a divorce if you have not created a financial consent order to protect your contributions post-divorce. 

What Are the Different Rules Across the UK?

In most parts of the UK, including Wales, Northern Ireland, and England, the rules regarding pensions are quite similar. 

They state that the entire value of all work, private and state-funded pensions, be included in a divorce settlement¹¹. This includes contributions made before, during, and after marriage. 

However, in Scottland, the rules differ in that only contributions made during a marriage are considered when it comes time to split a pension fund during a divorce¹². 

What Happens if We're Just Separating? 

If you’re just separating, it means that there’s no legal document that’s set in place.

Therefore, your pension agreements don’t change, and your partner has no claim over your pension. 

What Happens to My Pension if My Ex-partner or I Remarry?

Understanding what happens to your pension if your ex-partner or you remarry is simple. 

Your finances are generally left unprotected if a consent order wasn’t put in place during your divorce. 

If you or your ex-partner remarries, the new nuptials prevent the person from making certain claims to the ex’s finances; this is called the ‘remarriage trap’¹³. 

The remarriage trap does have its limitations, though. 

Property, income, and savings can be barred from claims by the remarried party, but pensions remain fair game¹⁴.

How Long After a Divorce Can My Ex-partner Claim My Pension? 

An ex-partner can lay claim to your pension fund at any time after your divorce. 

Yes, this means that even years after the divorce, they’re entitled to a portion of your pension fund. 

The only way they won’t be able to do so is if you have a legally binding consent order drawn up, preventing them from making any further claims to your pension fund. 

It’s advised to have a formal financial agreement in place when you get divorced so that you make a clean break financially and neither party holds any entitlement to future finances. 

Common Questions

In Conclusion

Going through a divorce is stressful, and worrying about your pension can add to this. 

It would be ideal to settle all financial agreements during your divorce proceeding and have these agreements set in a consent order. 

Even though your ex-partner is entitled to a portion of your pension fund, there’s a way of protecting yourself from future claims. 

By understanding your pension rights after a divorce, you can make a well-informed decision about a way forward regarding your finances.