Together with purchasing the family home, pensions are usually one of the largest investments couples will make during their lifetime. So common sense would dictate that they would be high on the agenda when it comes to a divorce settlement.

However, according to a recent Freedom of Information (FOI) request by St James’s Place, of the 602,491 divorces settled in court in the five years between 2016 and September 2021, just 80,290 included a pension disposal either by way of a sharing or attachment order – 13% of cases.

A pension sharing order is a legally binding agreement that requires the individuals to divide their pension assets at the time of divorce, while a pension attachment order is another way to split a pension on divorce but doesn’t result in a clean break. Here, the pension remains the ex-spouse’s property, and the attachment order directs them to pay the funds when they start to draw them from the scheme.

Pension attachment orders can prove significantly more problematic in the long run for both parties because there isn’t a clean break and the receiving spouse will be subject to the taxation and choices made by their ex-spouse, possibly for the rest of their life.

Overall, says SJP, pensions as part of a financial remedy in either form have been declining since 2018, and the impact of not sharing a pension could be more significant for women. According to their latest data, women hold on average £85,500 less than men in workplace-based or privately organised pensions.

Claire Trott, Divisional Director of Retirement and Holistic Planning at St. James’s Place, says: “The importance of pensions when considering divorce should not be underestimated. There are many different options available to both parties with regards to financial settlements and the easiest option at the time may not be the right choice in the long run. Pensions are complex at the best of times and even more so when you start to consider splitting them. Financial and actuarial advice is generally the best course of action.

“Pensions in particular can’t just be considered a monetary asset and, taking into account things such as health and life expectancy, a 50/50 split isn’t going to give a fair outcome. This can be even more apparent if you choose to offset one asset against another. For example, exchanging the pension for the house. You need to be clear of the true long-term value of each.”

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