Pensions and divorce in mediation
Key facts
- Pensions are often the largest asset in a divorce, sometimes worth more than the family home.
- There are three main ways to deal with them: pension sharing, offsetting, and attachment (earmarking).
- Each pension is valued using a cash equivalent transfer value (CETV), which can take up to three months to obtain.
- A pension sharing order splits a pension and can give both people a clean break.
- For complex pensions, a pensions on divorce expert (PODE) can advise on a fair split.
Pensions are the most commonly overlooked asset in divorce, and often the most valuable. It is easy to focus on the house and the savings you can see, and forget the pot that has quietly built up over decades of work. In many cases a pension is worth more than the family home, so leaving it out can lead to a very unfair outcome.
This page explains why pensions matter, how they are valued, and the three main ways of dividing them in mediation. It sits alongside our wider guide to financial mediation. This is general information, not financial or legal advice, and pensions are an area where professional advice is often worthwhile.
Why do pensions matter so much in divorce?
A pension is a store of future income, and years of contributions plus investment growth can make it very large. According to MoneyHelper, pensions might be your biggest asset and can be worth more than your home. Yet because you cannot spend a pension today, people often undervalue it or trade it away too cheaply.
This matters most where one partner has a much bigger pension than the other, often because one took time out of work or worked part-time to raise children. Ignoring pensions in that situation can leave one person facing a comfortable retirement and the other with very little. That is why pensions are included in full financial disclosure.
Getting pensions valued: the CETV
Before you can divide a pension you need to know what it is worth. The standard measure is the cash equivalent transfer value, or CETV. You request it from each pension provider, and it puts a single cash figure on the pension for divorce purposes. A CETV is valid in court for up to a year after it is issued, and it can take up to three months to arrive, so it is worth requesting early.
The CETV is a starting point, not the last word. For some pensions, particularly defined benefit or final salary schemes, the transfer value can understate the true worth of the guaranteed income. That is one reason a pension expert is sometimes needed to look behind the headline figure.
The three main options
There are three established ways to deal with a pension on divorce. Which one fits depends on the type of pension, your ages, and what you both need. Mediation is a good place to weigh them up.
| Option | How it works | Effect |
|---|---|---|
| Pension sharing | A percentage of one pension is transferred to the other person as a pension credit | A clean break; each person then has their own pension |
| Offsetting | One person keeps their pension; the other keeps more of another asset to balance it | No pension is split; balanced against the home or savings |
| Attachment (earmarking) | The other person receives an agreed share when the pension starts to pay out | No clean break; the pension stays in one name until it pays |
Pension sharing orders
A pension sharing order splits a pension at the point of divorce. A set percentage is transferred to the other person, who receives it as a pension credit, either in the same scheme or in one of their own. Because the split happens now, it gives both of you your own separate pension and supports a clean break.
Pension sharing is often the fairest option where pensions are large or unequal, because it divides the actual retirement income rather than swapping it for cash today. The order is made by the court as part of the financial settlement, so it is set out in your consent order.
Offsetting
Offsetting means one person keeps their pension in full, and the other keeps more of a different asset to make up for it, such as a larger share of the house or the savings. No pension is actually divided. It can be attractive where one person would rather have capital now than a pension later, for example to secure a home.
The difficulty with offsetting is comparing very different things: a pension paid decades from now against cash you can use today. A pound of pension is not worth a pound of housing equity, and getting the exchange rate right is not straightforward. This is another point where expert input can help.
Attachment or earmarking orders
An attachment order, sometimes still called earmarking, means the pension stays in one person’s name, but the other receives an agreed share of it when it starts to pay out. It does not create a clean break, because the two of you stay financially linked until the pension pays, and payments can stop on death or remarriage.
For those reasons attachment orders are now far less common than pension sharing. They are occasionally useful in particular circumstances, but most couples who want to divide a pension choose sharing or offsetting instead.
The State Pension and other pensions
Most pension discussions on divorce are about private and workplace pensions, because those are the ones that can be shared or offset. The basic State Pension cannot be shared in the same way. Under the newer State Pension system, each person builds up their own entitlement based on their National Insurance record, so it is generally treated separately rather than divided between you.
It is still worth both of you checking your State Pension forecast on gov.uk as part of building the full picture, especially if one of you has gaps in your record from time out of work. That forecast helps you both understand your likely retirement income alongside any private pensions being shared or offset.
When do you need a pension expert?
For a modest, straightforward pension you may be able to agree a fair split in mediation without extra help. But where pensions are large, where there are defined benefit schemes, or where you are comparing sharing against offsetting, it is often worth instructing a pensions on divorce expert, known as a PODE. A PODE is an actuary or specialist who reports on how to divide the pensions fairly.
What a PODE does
A pensions on divorce expert (PODE) can calculate the percentage split needed to give each person an equal pension income in retirement, or a fair offset figure. Their report helps you agree a split that stands up, and mediators regularly work alongside one.
Pension sharing on divorce was introduced by the Welfare Reform and Pensions Act 1999 and is available in England and Wales for divorces and civil partnership dissolutions. The court can make a pension sharing order, an attachment (earmarking) order, or approve an offset agreement, applying the section 25 factors of the Matrimonial Causes Act 1973, including the value of any pension benefit a party would lose. Pension arrangements are made binding through the consent order, and a pension sharing order takes effect only once the divorce is finalised.
Defined benefit and defined contribution pensions
It helps to know which kind of pension you each have, because they are valued and shared differently.
| Type | What it is | How it is valued |
|---|---|---|
| Defined contribution | A pot of money built from contributions and investment growth, common in modern workplace and private pensions | The fund value, with a CETV close to it |
| Defined benefit (final salary) | A promise of a set income in retirement, based on salary and years of service | A CETV that can understate the true worth of the guaranteed, inflation-linked income |
| Public sector (NHS, teachers, armed forces) | A form of defined benefit, often unfunded | Valued by CETV, but usually needs expert input to compare fairly |
With a defined contribution pension the CETV is close to the actual pot, so it is relatively straightforward to share. A defined benefit or final salary pension is trickier, because the CETV is a snapshot figure and the guaranteed income it buys, roughly the annuity you would otherwise have to purchase, may be worth far more than the number suggests. That is a common reason to involve an actuary or a pensions on divorce expert.
Equal income or equal capital?
When a pension is shared, there is a choice about what to equalise. Splitting the CETVs down the middle gives each person the same capital value, but not always the same pension income, because an older person’s share may buy less future income. A pensions on divorce expert can instead calculate the percentage needed to give each of you a similar income in retirement, which often means an unequal split of the CETV. Which approach is fairer depends on your ages and circumstances.
How a pension sharing order works, step by step
| Step | What happens |
|---|---|
| Value | Each of you obtains a CETV for every pension |
| Advise | A PODE or actuary reports on the split, if the pensions are large or complex |
| Agree | You agree a percentage share of the relevant pension |
| Order | The share is set out in the consent order with a pension sharing annex |
| Finalise | The order takes effect once the divorce is finalised (the final order, formerly decree absolute) |
| Implement | The provider has an implementation period, usually four months, to create the pension credit |
The person receiving the share gets a pension credit, either as a new pot within the same scheme (an internal transfer) or moved to a pension of their own (an external transfer). From then on it is their pension, which is what makes a pension share a clean break for that asset.
Helen and Paul had been married 20 years. Paul had a substantial final salary pension from his years in the same firm; Helen, who had worked part-time while raising their children, had only a small pot. They almost agreed that Paul would keep his whole pension in exchange for Helen taking the house. Their mediator suggested they obtain CETVs and a report from a pensions on divorce expert. The report showed Paul’s pension was worth far more than the house, and that an equal retirement income needed a pension sharing order, not an offset. With that information, Helen and Paul agreed a pension share alongside a fair split of the equity.
Frequently asked questions
Are pensions included in a divorce settlement?
Yes. Pensions are part of the financial settlement and must be disclosed in full. They are often the largest asset, so leaving them out can produce a very unfair outcome.
What is a CETV?
A cash equivalent transfer value is a single cash figure a pension provider gives for the value of a pension on divorce. It is valid in court for up to a year and can take up to three months to obtain.
What is the difference between pension sharing and offsetting?
Pension sharing transfers a percentage of a pension to the other person, giving each their own pension. Offsetting leaves the pension intact and balances it against another asset, such as the house or savings.
Do I always need a pensions expert?
Not for every case. A small, simple pension may be split fairly without one. But for large pensions, defined benefit schemes, or when comparing sharing against offsetting, a pensions on divorce expert (PODE) is often worthwhile.
How is a pension split made legally binding?
Through the consent order approved by the court. A pension sharing order takes effect once the divorce is finalised, and the pension provider then implements the share.
What is the difference between a defined benefit and defined contribution pension?
A defined contribution pension is a pot of money built from contributions and growth. A defined benefit or final salary pension promises a set income in retirement. Defined benefit pensions are harder to value, because the CETV can understate the guaranteed income.
How long does a pension sharing order take to put in place?
Once the divorce is finalised and the order is sent to the provider, the scheme has an implementation period, usually four months, to set up the pension credit for the person receiving the share.
Can we share the State Pension?
The new State Pension cannot be shared like a private pension, because each person builds their own entitlement from their National Insurance record. It is still worth both of you checking your State Pension forecast on gov.uk.
Sources
- MoneyHelper, How to split pensions in a divorce or dissolution, moneyhelper.org.uk. Accessed 9 July 2026.
- GOV.UK, Money and property when you divorce or separate: pensions, gov.uk. Accessed 9 July 2026.
- Welfare Reform and Pensions Act 1999 (pension sharing), legislation.gov.uk. Accessed 9 July 2026.
- Matrimonial Causes Act 1973, section 24B (pension sharing), legislation.gov.uk. Accessed 9 July 2026.