Updated: November 14, 2019

Pension Transfer After Divorce

Need to transfer a pension in the wake of a divorce? Find out how to take the stress out of the process and do it right in our guide

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: November 14, 2019

What will happen to my pensions after divorce?

Separating from your spouse can be a difficult process alone, so when it comes to transferring your pensions after a divorce, understanding how they will be divided can save you a lot of turmoil.

We have helped lots of people seek financial advice from the experts we work with, many who were previously unaware that there may be an alternative route for transferring their pension after a divorce.

In this guide, we’ve included the information you need to know about pension transfers as well as where you can turn to for advice.

How to find out what your transfer value is for a divorce transfer

To find out the transfer value for a divorce, you first need an accurate valuation of your whole pension.

The person who owns the pension is the only one who can request a valuation. When you’re getting divorced, your pension will be valued as a ‘cash equivalent transfer value’. Which is the same amount as you would get if you wanted to move your pension to another provider.

Because the value will include transfer charges, the total transfer value may be lower than the fund total.

The way you go about discovering this value depends on where in the UK you are divorcing:

Getting a divorce or dissolving a civil partnership in England, Wales or Northern Ireland? –
If you haven’t got an annual statement, you can get the cash equivalent transfer value by asking your pension provider.
This is possible for both a defined contribution pension or a personal pension.

If you’re getting divorced in Scotland –
 Your pension has to be valued on the official ‘date of separation’.
Only the value of your pension built up during your marriage will be considered for a transfer value.
You should therefore request a cash equivalent transfer value from your provider but make sure you ask them how much of the pension was built up during the time of your relationship.

If your pension is a final salary scheme, accurate valuations are more difficult. You still need to ask your provider for the cash equivalent value, but this is unlikely to reflect the true value of your pension.

Pension transfer values can get complicated. The expert advisors we work with can help make life a little easier.

To get help, make an enquiry and we’ll match you with a pensions expert who will be happy to answer all your questions.

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How do I transfer my pension after a divorce?

It’s important to take the time to understand what your rights are and what options you have for working towards a compromise that will work for both you and your ex-partner.

To help you through the decision process of transferring your pension after a divorce, follow our steps:

  • Ask for regular pension statements so you can keep track of how much you have accumulated and therefore how much you may receive after the division.
  • Before agreeing to the division of your pension, always seek independent financial advice.
  • Have a professional check the terms and conditions of your pension agreement. They can check whether you will lose any special features, such as a guaranteed annuity rate.
  • Consider alternative compromises. If you feel that it is unfair or unnecessary to divide your pension, think about proposing another solution.
    • Some ex-couples can come to an agreement which means that the pension pot is left out of the divorce settlement i.e allowing your ex-partner to keep the family home in exchange for waiving any rights to your pension or a pension cash equivalent transfer.

Offsetting your pension as a cash transfer after divorce

Offsetting your pension, essentially means that after a divorce, your ex-partner is transferred the value of their share of the pension. However, rather than receive this from your pension pot, they inherit a share of an asset that is the equivalent cash value of the agreed share of your pension.

Typically, the asset would be property although it is not limited to this and could include cars or savings.

The person who isn’t the pension holder would usually receive a larger share of the home. The pension holder retains their pension rights and benefits but receives a reduced value of the overall property after the divorce.

For your ex-partner, this means that they potentially have no pension and are solely reliant on the value of the assets they receive.

This option appeals to many divorcees as it provides a clean break after the separation with little admin and no court order.

Is my spouse entitled to my pension after divorce?

A pension is considered a joint asset and so even though one party may have earned the pension throughout their career, both people in the marriage may be entitled to it.

This is also reflective of how properties and other assets are divided during the divorce proceedings.

Dividing pensions can be difficult as most pensions have benefits such as a guaranteed income or monetary benefits associated with death.

What will happen to my pension benefits when my pension is divided?

A lot of people worry about what will happen to their pension benefits after divorce.

Some benefits accumulate over time so it’s good to know that after your years of hard work, any benefits that you have already built up will not be lost.

However, you could potentially lose additional benefits that can only be provided by the original scheme, such as a guaranteed income or death benefits – speak to one of the expert pensions advisors we work with if you’re concerned about this.

How can pensions be divided after divorce?

There are several options that could be beneficial for both you and your ex-partner when dividing your pensions.

Pension sharing

Pension sharing is available throughout the UK, but is not a compulsory route for divorcing couples.

As the pension holder, you will need to get an up to date valuation of your pension as well as any benefits associated.

This information will need to be passed over to the courts within three months, although this can vary depending on whether you as the trustee, had prior notice of the impending hearing.

It will then be up to the courts to decide how the pension will be divided and under what terms. The amount that your pension will be reduced by (in order to comply with the court’s decision) is referred to as a pension debit.

Deferred pension sharing

All too often we see couples who are in the process of a divorce, where one party is retired and receiving their pension and the other party is too young to be paid a pension.

Deferred pension sharing is essentially an agreement between you and your ex-spouse to divide and share the pension in the future.

Of course, this can cause some issues and disagreements as to who is entitled to how much. Therefore, this option can come with costly legal fees.

This option is not available in Scotland.

How will my ex-spouse receive their funds through pension sharing?

Some pension schemes allow the ex-partner to join the scheme in their own right which would require them to open up a pension in their own name.

Of course, they would need to meet the age requirements for a pension to receive the funds.

Another option would be that the ex-spouse transfers the value of the pension to another registered pension scheme of their choice.

If they meet the age requirements, they could then withdraw the pension as and when their pension scheme dictates they can be based on the terms of their scheme.

Can my ex-spouse receive the pension as one lump sum?

It’s also important to know that the courts may decide that a UFPLS (uncrystallised funds pension lump sum), should be paid instead of pension sharing.

This would allow the ex-spouse to access the fund in one go, taking 25% tax-free.

The remaining 75% would be taxable though so it is advisable that they seek financial expertise before proceeding as this can have implications on how much tax they pay in the future.

Even if your ex-spouse does not meet the age requirements for your pension scheme (usually 55), they can still access the cash they are entitled to, as long as you, as the pension scheme holder, meet the age requirements.

For more information about pension sharing and how it could affect both you and your ex-partner, you can arrange a free, no obligation chat with one of the expert advisors we work with.

Speak to a pensions transfer expert

Divorce can be overwhelming, so it’s good to know that when it comes to dividing or transferring your pension, there are professionals who can guide you through the process.

We work with a number of expert pension advisors who can offer you bespoke advice tailored directly to your circumstances.

So if you need advice about what will happen to your pension after a divorce, get in touch for a free, no-obligation chat, or give us a call on 0808 189 0463.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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