When couples separate, attention often turns immediately to the family home. It’s seen as the “big asset”, the one that matters most. But in many marriages—particularly those of longer duration—it’s the pension that quietly holds the greatest value. And yet pensions are the asset most commonly misunderstood, ignored, or divided incorrectly during divorce negotiations.
If you are going through a divorce or separation, understanding the role of pensions in your financial settlement is essential. Failing to deal with them properly can lead to serious financial disadvantage, particularly later in life.
In this blog, I explain why pensions deserve more focus, how they can be shared, and the key pitfalls to avoid.
1. Why pensions are often the largest asset
Although a home feels like a concrete, tangible asset, pensions can easily exceed its value—especially for individuals who have been contributing over a long career.
Common scenarios where pensions outweigh the family home:
- One spouse has a defined benefit (final salary) pension scheme.
- A long marriage where one partner took time out to care for children.
- High‑earning or public sector roles with generous pension arrangements.
- Multiple pensions accumulated over time that add up to more than expected.
It’s not unusual to see pensions worth hundreds of thousands of pounds—sometimes over £1 million—while the house is valued substantially lower.
Many people don’t realise this because they only look at the transfer value on their statement, which can be misleading. Some defined benefit schemes, for example, provide far more valuable guaranteed benefits than their transfer value suggests.
2. Why pensions are so commonly overlooked
There are several reasons pensions don’t get the attention they deserve:
- They’re complex and misunderstood.
- Many people find pensions confusing, and understandably so. This can lead to avoidance or a belief it’s safer to focus on assets they can “see”, like property.
- They feel far away.
- Retirement might seem a long way off, especially for younger divorcing couples—so pensions feel less urgent than housing or everyday finances.
- They’re easy to undervalue.
- A pension statement rarely tells the whole story. Two pensions with the same transfer value can provide very different levels of income.
- One spouse may not want to share it.
Because pensions feel personal—built over years of hard work—there can be strong emotional resistance to sharing them, leading to negotiation around other assets instead. This can leave the non‑pension‑holder much worse off.
3. How pensions can be divided on divorce
Pensions aren’t simply split down the middle. There are several options available, and the right one depends on your circumstances, the type of scheme, and your financial needs.
- a) Pension Sharing Orders
This is the most common and modern approach.
A percentage of the pension is transferred into a separate pension pot belonging to the other spouse. This gives both people independent access in retirement, which promotes fairness and long‑term security.
- b) Pension Offsetting
This involves one spouse keeping their pension while the other receives a greater share of other assets—usually the property.
It can work in some situations, but it is not always fair. Comparing a guaranteed pension income in retirement with equity in a home is not straightforward. Professional valuation is essential.
- c) Pension Attachment Orders
Much less common now.
These allow one spouse to receive a portion of the other’s pension income when it’s paid. The downside?
The recipient is dependent on their ex-partner’s retirement choices. This can cause long‑term insecurity.
4. Why professional valuation matters
Not all pensions are created equal. For example:
- A public sector defined benefit pension may provide guaranteed income for life.
- A defined contribution pot may be invested and fluctuate in value.
- Private sector pensions may include inflation-linked increases or lump‑sum entitlements.
Because of these variations, it’s often vital to obtain expert actuarial advice, especially where:
- there are significant pensions,
- one person has a defined benefit scheme, or
- there is a large difference between the spouses’ pension provision.
A properly prepared pension report allows for fair comparison and helps prevent costly mistakes.
5. The risks of ignoring pensions
The consequences of leaving pensions out of a settlement can be severe:
- Long‑term financial insecurity
- The spouse with little or no pension may face retirement poverty—something that cannot be easily remedied later.
- No second chance. A financial order is final.
- Unequal retirement outcomes
Even if everything else is split fairly, ignoring pensions can leave one spouse significantly worse off in later life.
6. How to protect yourself
If you are going through a divorce or separation, the key steps are:
- Insist on full pension disclosure from both parties.
- Seek specialist legal advice from a solicitor experienced in financial matters.
- Consider an actuarial report where pensions are complex or valuable.
- Avoid agreeing to offsetting without proper valuation.
- Ensure any settlement is finalised in a court‑approved Consent Order.
Final thoughts
Pensions may not be the most exciting part of a divorce—but they are absolutely essential. They often form the backbone of long‑term financial security, and overlooking them can be one of the costliest mistakes a separating couple can make.
With the right advice and a clear understanding of the options, pensions can be divided fairly, ensuring both people can look ahead to a secure retirement.
If you’d like help navigating pensions during divorce, or you’d like a review of your current financial position, I’d be happy to guide you through your options.
How can Nelsons help?
Should family mediation be a process that you feel could assist you to resolve outstanding issues between you and your former spouse or partner, or should you wish to find out more about the process, then please contact Gayle Rowley (Legal Director, Solicitor & Mediator) who will be happy to discuss your circumstances in more detail and give you more information about the services that our family law solicitors can provide along with details of our hourly rates and fixed fee services.
Please contact Gayle or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.
Contact UsIf this article relates to a specific case/cases, please note that the facts of this case/cases are correct at the time of writing.