Pensions in divorce: the asset everyone forgets

Ask most separating couples what they own and they'll list the house, the savings and the car. The pension comes last, if at all. Yet for a couple in their forties or fifties the pensions are frequently worth more than the house, and a judge expects to see them dealt with.

Step one: get the values

Every pension scheme must give you a cash equivalent value (CEV) on request, free once a year. Write to each scheme on day one of the process. Private pensions usually reply in 2 to 6 weeks. Public-sector schemes such as the NHS, teachers' and civil service pensions can take the full twelve weeks they're allowed.

The CEV is the figure that goes on the D81. Both of you need one for every pension you hold, including small ones from old jobs.

Why the CEV can mislead

For a defined-contribution pot the CEV is simply what's in it. For a defined-benefit or final-salary scheme it's an actuarial estimate, and it often undervalues what the pension will actually pay.

A CEV is the scheme's figure for what the pension is worth, and you can ask for one free once a year. If either of you has a final-salary pension, or any pension over about £100,000, a pension on divorce expert (PODE) report is recommended (£1,500 to £3,000, usually shared, 4 to 8 weeks) rather than relying on the CEV alone.

The expert report tells you what share actually produces equal retirement income. Agreeable's fairness check flags it when your numbers suggest one.

Three ways to deal with pensions

1. Pension sharing order

A percentage of one person's pension is transferred into a pension in the other's name. It's clean, it's final, and it's the most common approach. The percentage is written into the consent order and the scheme implements it after the final order.

2. Offsetting

One person keeps their pension; the other takes more of something else, usually the house. Simpler on paper, but comparing a pension to a house is comparing apples to oranges, and the person giving up the pension often gets a worse deal than it looks. Judges accept offsetting when the D81 explains it.

3. Pension attachment

Part of the pension income is paid to the other person when it comes into payment. Rare now because it stops on the payer's death or the recipient's remarriage. Usually only used where sharing isn't possible.

What a judge looks for

That both pensions appear on the D81, that the order says what happens to them, and that if there's a large gap and no sharing, there's a reason. Leaving pensions out entirely is the single most common cause of a DIY order being returned.