A plain English explanation of pension sharing orders in financial remedy proceedings in England and Wales: what they are, how they work, and when they're used.
A pension sharing order is a court order that transfers a percentage of one person's pension rights to the other person on divorce. Once made, it gives the receiving party their own independent pension entitlement, separate from the pension of their former spouse. The percentage to be transferred is decided either by agreement between the parties or by the court at a final hearing.
Pensions are often one of the most significant financial assets a couple accumulates during a marriage, sometimes exceeding the value of the family home, particularly for people who have worked in defined benefit or final salary schemes. Despite this, pensions are frequently overlooked or undervalued by people going through financial remedy proceedings without legal advice. Under the Matrimonial Causes Act 1973, the court must consider all financial resources when deciding on a fair financial settlement, and pension rights are explicitly included in that.
The transfer typically happens within a few months of the order being made, subject to the pension provider's implementation process.
Most private pension arrangements can be subject to a pension sharing order, including:
State pension and state pension credit entitlements cannot be shared under a pension sharing order. Pension sharing orders also cannot be made in respect of pensions that are already in payment, though other orders (pension attachment orders, sometimes called earmarking orders) may be available in those circumstances.
A pension attachment order (also called an earmarking order) does not give the receiving party their own pension. Instead, it directs part of the pension payments to be paid to the former spouse when the pension comes into payment. The key difference is that the receiving party under an attachment order has no independent pension, they remain financially dependent on the other person's decisions about when to retire and how to take the pension. For this reason, pension sharing orders are generally considered preferable in most situations, since they create a clean financial break on pensions as well as other assets.
There is no fixed rule. The percentage is determined by looking at all of the financial circumstances, including the overall asset pool, each party's income and needs, the length of the marriage, and the relative pension positions of both parties. In some cases, a pension actuary is instructed to carry out a pension on divorce report, which calculates what percentage would need to be transferred to produce equal pension income at a specified retirement age, or some other target outcome. This type of report is particularly relevant in cases involving defined benefit pensions, where the CETV may not be a reliable guide to the true value of the benefit.
Yes. Most pension providers charge an implementation fee for carrying out a pension sharing order, often between £500 and £2,000, though charges vary significantly between providers. Who pays this fee is something that should be addressed in the consent order or financial order. In some cases the court will specify who pays, in others it's a matter of negotiation.
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Can I get a pension sharing order if we've already been divorced?
A pension sharing order can only be made as part of financial remedy proceedings on divorce. Once the final order has been granted without any pension sharing order being made, the ability to pursue one is generally lost, though in some limited circumstances an application to set aside a financial order may be possible. This is why addressing pensions at the time of the financial settlement, rather than after the divorce is finalised, matters.
What if my spouse refuses to share their pension?
If a pension sharing order is not agreed, either party can ask the court to decide as part of a contested final hearing. The court will consider all of the relevant financial circumstances and may make a pension sharing order even if one party objects, if it considers this the fair outcome.
Do we need a pension actuary report?
Not always. In cases where pension values are relatively modest or where the overall settlement is being agreed, parties sometimes proceed without a formal pension report. Where defined benefit pensions are involved and their value is a significant part of the overall picture, a pension on divorce report from a specialist actuary is generally more reliable than relying solely on the CETV.
Can a pension sharing order be reversed?
No. Once implemented by the pension provider, a pension sharing order cannot be reversed. It is a permanent division of pension rights, creating a separate pension credit in the receiving party's name. Implementation usually happens within a few months of the order being made, and there is no route back once it is done.
What happens to the pension sharing order if one of us dies before it's implemented?
The rules on this vary between pension schemes and depend on the specific scheme rules. This is a genuine gap in many people's understanding, and worth checking with the pension provider if there is likely to be a significant delay between the order being made and being implemented.
Is the pension credit taxable when I receive it?
The pension credit itself is not taxed when it's transferred. Tax applies in the normal way when the pension eventually comes into payment, at the recipient's applicable income tax rate at that time. Separately, most pension providers charge an implementation fee, and the order should say who pays it.
This article provides legal information about the financial remedy process in England and Wales. It does not constitute legal advice. For advice about your specific situation, speak to a qualified solicitor.
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