The Impact of Divorce on Retirement

A Prudential report in 2015 showed that people approaching retirement who have been divorced are more likely to delay retirement than those who have never divorced. A pension fund is likely to be one of the largest and most complicated assets a couple will have to split in the event of a divorce. The impact of divorce on retirement income can be significant.

The personal circumstances of those involved in each divorce are different. The arrangements can range from simple – if each party has their own personal pensions – to highly complex. The following applies in England and Wales only. Remember, the term divorce applies equally to civil partnerships.

Generally, there are three options open to the courts if pension assets are to be allocated across each party in a divorce. They are offsetting, earmarking and sharing.

In offsetting the value of a pension is set against other assets. So, for example, if party ‘A’ was to keep all their pension party ‘B’ would receive an equivalent value of other assets previously held by the couple. They may receive a greater share of the value in the family home for example that matches the value of the pension.

In earmarking, if party ‘B’ holds a pension but party ‘A’ does not then party ‘A’ will receive agreed payments (and/or lump sums) when the pension is in payment.

In sharing, if party ‘A’ holds a pension entitlement but party ‘B’ does not then the pension is shared between Party ‘A ‘ and party ‘B’ at the time of divorce. Party ‘B’ receives a share of the pension benefits transferred into their name.

Each of the above although straightforward in principle can become complex depending on the circumstances. If planning a divorce it is important to get professional advice at the earliest opportunity. Divorce is a risk to your retirement income.


This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. The past is not a guide to future performance. The value of investments can go down as well as up and you may not get back the full amount you invested. Tax and financial regulations can change. Any figures quoted above are correct at the date of publication.

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