This split in pension benefits at the time of the divorce allows the creation of two separate pots to which the parties can each contribute in the normal way.

Pension sharing orders are made in percentage terms over a pension.

The starting point in valuing a pension is to seek a cash-equivalent transfer value. This division can be created by an internal transfer within the pension scheme or via an external transfer, depending on the scheme’s rules.

There can be costs associated with implementation, and agreement will need to be reached between the parties about the appropriate apportionment of these fees.

Pension sharing orders represent an important advancement in the landscape of pensions on divorce. However, the PAG report makes one thing very clear: there is no one-size-fits-all solution when it comes to pensions.

Dealing with multiple pensions from different employers and differing types of pensions – whether DB or DC – can make it hard to determine the appropriate percentage share to transfer.

So, too, can discrepancies in age between the parties as they consider whether it would be better to split the capital value of the pension or to seek an equalisation of the income at the point of retirement.   

Conclusion

Divorce can be a hard reality to face. It is important to take specialist legal and pensions advice about the parameters of any proposed financial settlement to ensure that the terms are fair. 

Given that pension wealth typically exceeds property wealth in higher income households, especially outside London, in the words of the PAG report, “ignoring the pensions or agreeing to ignore the pensions is simply not an option”. 

Henrietta Thomas is a partner at Burgess Mee Family Law