Pensions are shared in less than one in eight divorces
- Since 2016 only 80,290 of 602,491 divorces included a pension disposal
- Of the divorces that included a financial remedy 40% factored in pensions
- Impact of not sharing a pension is likely to be higher on women who typically have smaller pots than men
Pensions are split between couples in less than one in eight (13%) divorces, according to research from St. James’s Place (SJP).
A recent Freedom of Information request (FOI) by SJP found that, between 2016 and September 2021*, only 80,290 of the 602,491 divorces that were settled in court included a pension disposal by way of a sharing or attachment order.
A pension sharing order is a legally binding agreement to divide your pension assets at the time of divorce. The order will state how much should be divided alongside other assets such as investments and property, and the receiving party may be able to become a member of the pension scheme or transfer the value to a new pension provider. The actual decision with regards to the split can be negotiated between the parties or, if an agreement can’t be made, the court may intervene.
A pension attachment order is another way to split a pension on divorce but doesn’t result in a clean break. The pension remains the property of the ex-spouse and the attachment order directs them to pay the funds when they start to draw them from the scheme. This can cause a number of issues especially if the divorce is acrimonious.
Taking into account whether a divorce includes a financial remedy disposal, the number of divorces that include a pension disposal is 40% on average since 2016.
However, the number of financial disposals that include pensions appears to be decreasing. In 2016, 29% of divorces with a financial disposal included a pension sharing disposal, but this fell to 24% in 2021. Similarly, financial disposals that include a pension attachment fell from 12% to 5% over the same period. Pension attachment orders are 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, pensions as part of a financial remedy in either form has been on a decline since 2018 where it appeared to peak. This is a real backwards step with pensions generally being the largest or second largest investment a household may have.
The impact of not sharing a pension could be more significant for women. According to data from SJP’s latest Financial Health Index, 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.”
Notes to Editors
This information is for the sole use of journalists and media professionals, and has not been approved by St. James’s Place Financial Promotions. Any calculations shown are for illustration purposes only and are not guaranteed. Actual investment returns may be lower than those illustrated.
* Due to HMCTS reform, financial remedy data is now being entered on to the new core case data (CCD) system. Data on pension sharing, attachment and other financial remedy disposals are only available from Familyman data (up to the end of September 2021).