Despite 25 years of Pension Sharing Orders, pensions remain one of the least understood yet most financially significant assets in divorce. With many clients still unaware of their true value or that they can be shared, Senior Associate Judit Kerese of Stowe Family Law explores why pensions matter far more than most realise and how advisers can play a crucial role in protecting long-term financial security.
Despite the recent 25th anniversary of Pension Sharing Orders (PSOs), pensions remain one of the most misunderstood and undervalued assets in divorce. Yet for many clients, they are the real heavyweight in their financial affairs and often the single most valuable asset they own. Getting this wrong isn’t a minor oversight; it can fundamentally reshape a client’s retirement.
A recent public survey by Stowe Family Law starkly highlights the issue: only 12% of people polled included pensions in their divorce settlement, and 66% did not know pensions could be shared at all.
For advisers, this presents a significant opportunity, as they are uniquely positioned to provide long-term clarity at a time when clients are focused on immediate needs, ensuring that retirement is not sacrificed amid the turmoil of divorce.
Why pensions matter more than clients realise
In many marriages, the pension sits quietly in the background, rarely discussed or viewed with the same clarity as property or cash savings. Clients can picture their home or bank balance; pensions often feel abstract, complex or unfamiliar.
This mindset carries consequences. Pension wealth can exceed the value of the family home, and failing to factor it into a settlement can severely weaken long-term financial security. Women, already disproportionately affected by the gender pension gap, are particularly at risk when pensions are overlooked.
As a family lawyer, I see this repeatedly: clients focus on urgent priorities such as housing, childcare and income stability. Retirement feels distant. Yet this is precisely when long-term planning is most vital. When advisers step in early and explain the true value of pension assets, they can materially alter a client’s financial future for decades.
The main options for dividing pensions:
When dealing with pensions on divorce, couples have three main options, each with different implications for financial sustainability.
Pension Sharing Orders
A PSO divides pension benefits between spouses, specifying the percentage of one or more pension arrangements to be transferred to the other spouse, whereby that spouse can then freely invest the pension credit in their own arrangement(s) . PSOs apply to most pension types, including some overseas schemes and are widely regarded as the fairest and most actuarially accurate method of equalising retirement assets.
They offer a clean break, giving both parties complete future control. However, they can be technically complex and often involve implementation costs. Scheme rules, the limitations of Cash Equivalent Values (CEVs) and the need for actuarial input all influence outcomes. Advisers must play a key role in ensuring PSOs are properly understood.
Pension Offsetting
Offsetting is the most common alternative. One party keeps their pension(s), while the other receives a larger share of another asset, typically the family home, to offset the difference. It provides a clean break and avoids scheme involvement, which can be attractive during a stressful period.
But offsetting also brings risks. Clients frequently overvalue the home and undervalue pensions, and inaccurate valuations can leave the financially weaker party significantly disadvantaged later in life. Advisers add essential value here, using modelling and projections to show the 10-, 20- or 30-year implications of choosing property over pension wealth.
Pension Attachment (Earmarking) Orders
Now rare, pension attachment orders direct a portion of a pension benefit to an ex-spouse upon the pension holder’s retirement. These arrangements do not provide a clean break, and the recipient has little control over the timing of payments. In addition, they also carry the risk of the benefits ceasing if the pension holder dies or if the pension receiver remarries. For most modern divorces, attachment is reserved for particular circumstances rather than used as a preferred solution.
A moment for advisers to lead
This is a moment for the advice profession to lead. Financial planners already guide clients through retirement planning, risk profiling and long-term modelling; divorce simply sharpens the urgency of that expertise. Raising pension considerations from the very first meeting sets a clear expectation that these assets are central to any settlement, not an optional extra. When clients grasp the true value of their pension rights through clear explanations, modelling and long-term projections, they are far better equipped to make confident, informed decisions.
Collaboration with family lawyers is equally essential, ensuring valuations, tax implications and implementation rules are aligned and nothing slips through the cracks. Advisers should also look beyond CEVs and draw on actuarial insight where necessary, protecting the financially weaker party from leaving divorce with inadequate provision for later life.
Despite legislation being in place for 25 years, strong adviser leadership remains essential. Too many clients still miss out on fair pension outcomes, and advisers are some of the best placed to change that, empowering clients to secure the long-term financial stability and retirement they deserve.
