Pensions are usually either the largest or second largest investment people will have in their lifetime and, as such, it would seem logical they would be a highly contested asset when married couples divorce.
But a Freedom of Information (FOI) request by St James’s Place found the opposite.
Between 2016 and September 2021, of the 602,491 divorces that were settled in court, just 80,290 included a pension disposal either by way of a sharing or attachment order.
That is 13% of cases in five years.
A pension sharing order is a legally binding agreement that requires the individuals to divide their pension assets at the time of divorce; whereas a pension attachment order allows the ex-spouse to keep hold of their pension and then pay the funds when they start drawing down from the scheme.
SJP also found, when taking into account whether a divorce includes a financial remedy disposal, the number of divorces with a pension disposal grew to 40% since 2016.
Overall, however, the number of financial disposals that include pensions are in decline; in fact, pension sharing appeared in 29% of divorces in 2016 compared with 24% in 2021.
Similarly, financial disposals that included pension attachment fell from 12% to 5% in the same period.
SJP said that splitting pensions as part of a divorce reached its peak in 2018 and has been on a steady decline since, marking a “real step backwards”. It added that women could be the most impacted by this as they have pots that are, on average, £85,000 ($96,113, €97,541) smaller than men.
Complex area
Claire Trott, divisional director of retirement and holistic planning at SJP, said: “The importance of pensions when considering divorce should not be underestimated. There are many different options available to both parties with regards to financial settlements and the easiest option at the time may not be the right choice in the long run.
“Pensions are complex at the best of times and even more so when you start to consider splitting them. Financial and actuarial advice is generally the best course of action.
“Pensions in particular can’t just be considered a monetary asset and, taking into account things such as health and life expectancy, a 50/50 split isn’t going to give a fair outcome.
“This can be even more apparent if you choose to offset one asset against another. For example, exchanging the pension for the house. You need to be clear of the true long-term value of each.”
