10 Questions Every High-Net-Worth Individual Should Ask About Pension Sharing

When couples first consider the financial implications of a divorce, their minds almost always jump to the family home. Who gets to stay? Will it have to be sold?

For many of our clients in Cheshire, Greater Manchester, and London, this focus, while understandable, often overlooks the elephant in the room. In high-net-worth divorces, it is overwhelmingly common for the couple’s combined pension pots to be their single largest and most valuable asset, often surpassing the equity in even a substantial family home.

Unlike a house or a bank account, pensions are complex. They are wrapped in trust law, subject to tax rules, and notoriously difficult to value. Getting the pension division wrong can be a multi-million-pound mistake that can substantially alter your financial future.

The main tool the court uses to achieve a fair split is a Pension Sharing Order (PSO). To help you understand the process, we’ve answered the 10 most common questions we hear from our clients.

What is a Pension Sharing Order (and what isn’t it)?

A Pension Sharing Order is a formal Court Order that instructs the trustees of a pension scheme to divide a member’s pension.

It’s crucial to understand what it isn’t. It is not an order to turn the pension into cash. Your spouse won’t receive a cheque. Instead, the order specifies a percentage (a “pension credit”) that is “carved out” of the member’s pension and transferred to the other spouse.

This creates a brand new, separate pension in the receiving spouse’s name. They become a pension member in their own right, with full control and independence over their new fund.

Is my pension safe just because it’s in my name?

This is one of the most common and dangerous misconceptions. The short answer is no.

English law is clear on this. All pensions built up by either party during the marriage are considered “matrimonial assets” and are placed on the table for division. It makes no difference whose name is on the policy or who made the contributions.

The law rightly recognises the non-financial contributions of the other party, such as running the home or raising children, which enabled the pension-holding spouse to focus on their career.

Does “equality” mean every pension is automatically split 50/50?

Not necessarily. The court’s primary duty is to achieve a fair and just outcome for both parties.

To do this, the court analyses the factors set out in Section 25 of the Matrimonial Causes Act 1973. This includes the length of the marriage, your ages, your current and future financial needs, and the other assets available. In some cases, a fair outcome might be a 50/50 split. In others, it might be 60/40, or one party may receive a larger share of a different asset entirely to meet their needs.

Do I have to split my pension, or can I keep it and give my spouse other assets?

This is a strategic question. You do not have to split the pension if a fair outcome can be achieved in another way. This is known as “offsetting”.

For example, you might be a business owner who wants to keep your £2M SIPP (Self-Invested Personal Pension) intact. In return, your spouse might receive a larger share of the other capital assets, such as the family home, a second property, or a larger share of cash and investments.

This “trades” their claim on your pension for other assets of equivalent value. This is a common and effective strategy, but it forms a key part of your overall finances and divorce settlement and requires extremely careful valuation.

My pension provider sent a “CETV”. Is that the final value?

Be very careful. When you request a valuation for divorce, your provider will send a “Cash Equivalent Transfer Value”, or CETV.

For a simple “pot of money” pension (a Defined Contribution scheme), this value is usually accurate.

However, for a Defined Benefit (or “Final Salary”) scheme, the CETV is often just a starting point and can be dangerously misleading. It’s an internal calculation by the scheme that often grossly undervalues the real-world cost of replacing the guaranteed, inflation-proofed income that pension promises for life. Relying on the CETV alone can lead to an unfair settlement.

Why is my “Final Salary” pension treated differently from my SIPP?

This is the most important concept to grasp. You cannot compare a £1M SIPP with a Final Salary scheme that has a £1M CETV. It is comparing apples and oranges.

• A Defined Contribution (DC) scheme (like a SIPP) is a “pot of money”. Its value is what it says it is.
• A Defined Benefit (DB) scheme (like a “Final Salary”) is a “promise”. It’s a guarantee of a specific income (e.g. £50,000 a year) from a certain age, for life.

The true value of that promise is often far higher than the CETV suggests. You simply cannot add the two CETVs together and divide by two. This requires specialist analysis.

What about the pension I built up before I got married?

This is a valid question. The portion of a pension built up before the marriage (or after separation) can often be legally ring-fenced as “non-matrimonial property”.

However, there is a major exception. The court’s priority is to meet the “needs” of both parties and any children. If the “marital” assets (those built up during the marriage) are not sufficient to meet everyone’s reasonable needs, the court can and will invade non-matrimonial assets, including pre-acquired pensions, to achieve a fair outcome.

As a general rule, the longer the marriage, the more likely all assets are to be shared.

What actually happens after the Pension Sharing Order is made?

Once your financial agreement is finalised and approved by a judge, the PSO is “sealed” (made official) and sent to the pension trustees. They then have a set period (usually four months) to “implement” the order.

At this point, the receiving spouse (the “pension credit member”) often has a choice:

1. An Internal Transfer: They become a member of the same pension scheme as their ex-spouse. (This is often the only option for public sector or DB schemes.)
2. An External Transfer: They transfer their new pension pot to a different personal pension of their own choosing. (This is common for SIPP or other DC schemes.)

Will I have to pay tax on the pension I receive or share?

This is a common fear. The transfer itself is tax-neutral. The person giving up a share of their pension does not pay Capital Gains Tax, and the person receiving it does not pay Income Tax.

However, receiving a large pension credit will impact your future tax planning. The old Lifetime Allowance (LTA) was replaced in 2024 by two new caps: the “Lump Sum Allowance” and “Lump Sum and Death Benefit Allowance”. How the pension share affects these new limits for both parties is complex and makes specialist financial advice essential to protect your future tax-free cash.

Why does my solicitor keep mentioning a “PODE” or an “actuary”?

If you have significant pensions, especially a Defined Benefit scheme, your solicitor will almost certainly recommend instructing a PODE (Pension on Divorce Expert).

A PODE is a neutral financial expert, usually an actuary, who is instructed by both parties. Their job is to write a specialist report for the court that:

• Properly values all the pensions (especially the DB “promises”).
• Shows how to split them to achieve a fair outcome (e.g. equal income in retirement, not just an equal capital value now).
• Models different scenarios, such as offsetting.

In complex high-net-worth divorce cases, a PODE’s report is essential for protecting your interests.

Get specialist advice before you act

From this brief guide, it’s clear that pensions are often the most valuable and technically complex assets in any financial settlement.

Guesswork just isn’t an option. An error made today by simply splitting a CETV down the middle could leave you with a six- or seven-figure gap in your retirement fund.

Recognised in the Legal 500 UK and Chambers and Partners, our team at Maguire Family Law specialises in handling complex financial settlements for high-net-worth individuals across Cheshire, Manchester, and London.

We work closely with the UK’s leading PODEs and forensic accountants to ensure your most significant asset is valued correctly and divided fairly. If you are concerned about your financial future, contact our expert team today for a confidential consultation.