• A pension claim – is this really worth the bother? I am only interested in the house.
  • My husband says that we just keep our own pensions but mine’s only a state pension and he has been in an occupational pension scheme for the last 15 years.
  • My spouse has a local authority pension. Can I make a claim on this?
  • I do not know what my wife’s pension is worth as she has never shown me a valuation. My pension is worth more than hers. Is it really worth the effort of finding out about hers?
  • What is this CEV that people refer to?
  • My husband is a police officer and his pension scheme has provided a valuation. Surely I cannot challenge the value?
  • An Actuary. That sounds expensive. What does he do to earn his fee?
  • In what way can pension claims be resolved?
  • Well, if I cannot pay my pension sharing order proceeds into a scheme of my own choosing – is it really worth the bother of bringing a claim?
  • My husband says that I can have the house but he will keep his pension. Can you tell me if this is reasonable?
  • For how long do I need to be married before I can claim on her pension as part of the divorce?
  • Do the pension trustees charge anything and if so, who pays them?

Pensions need to be taken into account when negotiating a financial settlement on divorce or separation. A pension has a capital value and hence is an asset as well as a future source of income. Often a pension fund, although not a realisable asset like a savings account, can be the most valuable of all the assets.

There are different types of pensions:

State Pension

This falls into two parts:

  • The Basic State Pension. Most people will be entitled to this and the amount that they will receive depends upon the number of years of national insurance contributions that they have built up. A man born after 6/4/1945 and a woman born after 6/4/1950 will require 30 qualifying years of contributions to be entitled to the full state basic pension – currently £92.25 per week for a single person. It is classed as a social security benefit and hence the courts do not have the power to make an order which affects it. However, in the event of a divorce, a former wife who has a small retirement pension can ask the Department of Work and Pensions to substitute her ex-husband’s national insurance record for her own so that she can qualify for a larger state basic pension.
  • The State Second Pension. This replaced the State Earnings Related Pension Scheme. Collectively, these pensions are described as Additional State Pensions. Such benefits are either provided by the State (a ‘contracted-in’ scheme) or by a private pension scheme provided by the employer (a ‘contracted-out’ scheme) or by the individual themselves (an ‘appropriate personal pension’). A spouse cannot, on divorce, ask for their former partner’s record to be substituted for their own so that they receive an Additional State pension or a larger one to which they would ordinarily be entitled. However, an Additional State pension can be subject to a pension sharing order.

It is possible to ask the Department of Work and Pensions to supply you with a pensions forecast to tell you what State pension you will be entitled to on divorce – the form that you require is called a BR19 and can be downloaded from their website. A request can also be made, on Form BR20, for them to supply you with the capital value of your Additional State pension, which in some cases can exceed £100,000. It follows that it is vital that Additional State pensions are not ignored when dealing with a divorce.

Occupational Pension – Salary Related Scheme (Defined Benefit Scheme)

This type of scheme is more commonly known as a Final Salary scheme and by definition, is usually based upon the employee’s salary and length of service. For example, the scheme might promise to pay the employee 1/60th of their final salary for every year of service with the employer. It may also promise a separate tax free lump sum on retirement or the right to commute part of the pension for a tax free sum. The risk of ensuring the pot is large enough to pay the benefits falls entirely upon the employer. Such pensions are most common in the public sector and also with other larger employers and older pension schemes. Increasingly less generous schemes are being offered to new employees.

Occupational Pension - Money Purchase Scheme (Defined Contribution Scheme)

These schemes are now more common and are where the employer and employee make contributions which accumulate over a period of time together with investment returns to create a fund which must be used on retirement to purchase an annuity/pension. The amount that the individual receives depends upon the contributions made, rises and falls in the stock market and the costs of purchasing a pension/annuity. On retirement the scheme member is usually entitled to take up to a quarter of the value of the scheme as a tax free lump sum and the remainder as monthly and generally taxable pension income.

Personal Pensions

Personal pensions are also money purchase schemes and hence the amount received by the individual on retirement depends upon the factors outlined above. The big difference between a personal money purchase pension scheme and an occupational money purchase pension scheme is that the individual’s employer is not required to make any contributions towards the personal pension fund. It follows that employees and self-employed people can have this type of pension scheme. The usual form that such a fund takes is where the individual purchases investments through a life assurance company. The management of the fund is dealt with by a fund manager although the individual chooses what they want to invest in. There is a different type of personal pension called a Self-Invested Pension Plan, where the individual has some involvement in the management / investment of the fund. In such schemes the contributions can be used to purchase not only shares and equities but also commercial property.

Valuation of Pensions on Divorce

The Cash Equivalent Value (CEV) is the figure which is used to value a pension on divorce. The CEV has been available since at least the mid 1980s and is the amount of an individual’s pension fund which would be transferred into another fund if so required. It provides the value of the pension rights accrued as at the date of valuation.

The CEV has certain advantages in that it is usually free (an individual is entitled to one free CEV from their pension provider in any 12 month period) and it is relatively easily available. However, it also has disadvantages in that different actuarial assumptions can produce different CEVs. Also, the CEV may not accurately reflect the value of the fund because, for example, it may be under-funded. In addition, a final salary pension can have value in excess of the CEV because it allows for salary increases over time. It follows that Public sector and Armed Forces pensions can have CEVs which are considerably lower than the equivalent fund that would be needed in the private sector to purchase a pension of equal worth.

It is therefore sometimes necessary to obtain specialist advice from an independent actuary about the true value of a pension fund. Such a report is usually obtained pursuant to an order of the court and upon the joint instructions (and at the share expense) of the parties. It is normal for the actuary to comment upon the appropriate level of pension sharing order required to, for example achieve equality of incomes on retirement in the case of a long marriage, and to provide his / her opinion on the effect of a pension sharing order to the transferor and the transferee as well as the capital figure which would be required to offset a pension claim (see below).

Such a report can be of great assistance to the lawyers and Court in deciding upon the fairest way to deal with the pension assets. At Blackdown Family Law Solicitors, we can advise you about whether such a report is necessary and we can draft / approve a letter of instruction to the actuary to ensure that it contains all of the relevant questions for him / her to comment upon.

Pensions can be dealt with in the following ways:-

  • A Pension Sharing Order – this is only available ancillary to divorce proceedings and not in any application for a Judicial Separation or as part of a Separation Agreement. Pension Sharing is where the Court divides one party’s pension on divorce so that a fund is created in their ex-spouse’s some name. Depending upon the rules of the particular pension scheme concerned, the ex-spouse’s fund either remains with the same pension provider and they become a member in their own right (an ‘internal transfer’) or it is transferred into a different scheme (an ‘external transfer’) so that part of one party’s pension is taken away and given to the other party. In either case, each party will have an entirely separate pension fund which is subject only to the individual pension scheme rules and not to any involvement from the other party.

Some schemes, particularly those with the Public Sector and the Armed Forces, will only allow internal transfers.

Pension Sharing should always be actively considered in all financial claims on divorce save for the shortest of marriages; the smallest of pension funds or where the parties pension rights are very similar in value and future entitlement.

  • Offsetting – this is where one party is compensated for the loss of pension rights by giving them a larger proportion of the other assets. For example one party might keep the former matrimonial home and a higher proportion of the savings and the other would retain their pension in its entirety or only lose a small proportion by way of a Pension Sharing Order. There can be good reasons for not resolving a pension claim by way of Pension Sharing and at Blackdown Family Law Solicitors, we can advise you fully upon your options.
  • Attachment – this is where the pension remains in one party’s name and with his / her pension scheme, however part of it is ‘ring fenced’ for the other party on the retirement of the paying party. In this way, when the pension becomes payable, the receiving party may, for example, receive some or all of the tax free lump sum payment and monthly pension income and the paying party will take the remainder.

Attachment has one major disadvantage in that it is dependent on the member’s pension rights. Therefore, if that party decides to delay receiving their pension until they are 69 years old, for example, then the other party will also not receive any payments until then. In addition, the party with the benefit of the Attachment Order will lose all claims in relation to it if the scheme member dies before them.

Consequently, in most matrimonial financial cases the pensions are dealt with by way of a Pension Sharing Order or by way of offsetting.


Over the last 22 years John Turner, the Principal of Blackdown Family Law Solicitors has dealt with all aspects of pension assessments, claims and orders on a regular basis. He will advise you on the most effective and efficient way of proceeding whilst taking into account all of the circumstances of your case. Through extensive and successful experience he will work with you in order to achieve the best outcome.

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