Going through a divorce can be an extremely challenging time for you and your family. There’s a lot to deal with, and your retirement savings and pensions are important points to think about.
We recommend that you get financial advice to help you deal with your specific circumstances. If you don't have a financial adviser, you can visit Moneyhelper to find the right one for you.
While it can’t be treated as advice, we’ve created a short guide below on some things to consider. When we talk about “divorce” on this page, we mean divorce or dissolution of a civil partnership.
What are the options?
The most common way a pension is dealt with when a couple divorces is through pension sharing. Pension sharing splits the customer’s pension so that part, or all, of it is transferred to a separate pension arrangement for their ex-partner. This allows a clean break.
Offsetting and earmarking / attachment orders can also be used to take pension benefits into account when splitting the finances of a couple who are divorcing.
- Earmarking / attachment: a portion of the customer’s pension benefits are allocated to their ex-partner. This doesn’t allow for a clean break, as the ex-partner will need to wait for the customer to take benefits, or die, before they will receive anything.
- Offsetting: pension benefits are offset against other matrimonial assets. This allows the customer to keep their pension whilst the ex-partner keeps other assets. This is a clean break option.
Which pensions can be shared?
Pension sharing can apply to all types of private pensions. This includes occupational, personal, registered and non-registered pensions as well as pensions already in payment.
The basic State Pension allowance can’t be shared although the additional State pension may be shared in certain circumstances. More detailed information can be found on the government’s website.
Which pension assets are taken into account?
- In England and Wales this will be the total value of pension assets which have been built up by the parties to the marriage (or civil partnership).
- In Scotland, only the value of pension assets which have been built up during the marriage (or civil partnership) until the ‘date of separation’ can be taken into account.
What documentation do pension providers (including Aegon) need?
- England & Wales: a pension sharing order issued by the court, accompanied by a pension sharing annex (Form P1). Both should quote the reference number of the pension to be shared along with the percentage which the ex-partner is to receive.
- Scotland: a pension sharing order issued by a court or a ‘qualifying agreement’. Both should include an annex quoting the reference number of the pension to be shared along with the percentage or monetary amount that the ex-partner is to receive.
Other information required
The pension provider (if you have an Aegon pension, in this case, us), will also need information from both parties such as dates of birth, addresses, National Insurance numbers, details about the scheme to which pension sharing applies and any scheme the ex-partner wishes to transfer their share into. In Scotland, this information must be received by the pension provider within two months of the date of the court order.
How long should it take?
Once the pension provider has all the required information, they have four months to implement the pension sharing order. In some circumstances, the implementation period may be extended.
When dealing with pension sharing, a pension provider may have to correspond with the customer and their ex-partner plus the solicitors and financial advisers for both parties. There are set timescales for providing valuations and information relating to the pension-sharing process.
How are the pension assets valued?
The share of the pension to which the ex-partner is entitled is fixed at the time of the divorce. The actual ‘transfer’ will take place during the implementation period. The pension provider can select any date within the implementation period to value the pension for pension-sharing purposes.
- Percentage: the assets in the pension at the time of the divorce are valued on a day chosen by the pension provider during the implementation period. The ex-partner will receive their percentage share in the form of a ‘pension credit’. The same amount will be deducted from the customer’s pension. The ex-partner is not entitled to any capital or growth associated with contributions received after the divorce.
- Monetary amount: if the pension sharing order or agreement provides for a monetary amount (applicable only in Scotland), the ex-partner will receive this amount as a pension credit.
What happens next?
Once a pension share has been completed, the pension provider must notify the customer and their ex-partner within 21 days of the transfer. The ex-partner may choose to transfer their pension credit into another scheme. Depending on the rules of the particular scheme holding the benefits, the ex-partner may be able to leave their pension credit in the original scheme.
Review your expression of wish/death benefit nomination
A life change, such as a divorce, presents a good opportunity to review any expression of wish or death benefit nominations you might have already made. It’s a good idea to review these regularly, but especially when your circumstances change.