Pensions and divorce ― marriage or civil partnership breakdown

When a married couple divorces or a civil partnership is dissolved, there is likely to be a sharing out of the assets belonging to the former couple.

Accrued pension benefits, whether in a defined contribution or defined benefit pension scheme, may be a major asset. With the automatic enrolment of many employees into workplace pensions, this is only likely to increase.

If either or both of the parties to the marriage or partnership have accrued pension rights, then these are viewed by the court as part of the former couple’s assets for disposition on divorce.

If a prenuptial agreement is in place, and if it was freely entered into by each party with a full appreciation of its implication, the courts may uphold it, unless it would not be fair to hold the parties to it. While it is outside the scope of this guidance note to discuss the validity of prenuptial agreements, you should note that the existence of such a document could impact on pension arrangements on a break-up.

In this guidance note: ‘marriage’ applies similarly to civil partnerships, ‘divorce’ applies similarly to the dissolution of a civil partnership and ‘spouse’ applies equally to a civil partner.

Some of the other terms used are explained in the Pensions glossary of terms guidance note.

As with all pensions matters, considering the impact of divorce on pensions may involve regulated advice and you should exercise great care in this regard. See the Regulated investment advice guidance note.

This guidance note discusses the options available in terms of taking accrued pension benefits into account on divorce and the tax consequences of the different arrangements.