Couples navigating divorce urged to understand pension implications as financial disputes rise
More divorcing couples are turning to the courts to resolve financial disputes, amid growing concern over long-term financial security and the rising cost of living.
Recent Ministry of Justice figures show applications for financial remedy orders reached their highest level in 15 years during 2025, despite overall divorce numbers falling. The figures show there were 49,067 applications for a financial remedy in the family courts in 2025, the highest since 2010 when 51,681 applications were made.
Family law specialists say the trend reflects increasing anxiety about future finances, with pensions becoming one of the most significant - and often most misunderstood - assets in many settlements.
A common misconception is that a person will automatically continue to benefit from their former spouse’s pension post-divorce, including any widow(er)’s pension if the former spouse dies. In reality, divorce will generally end any entitlement to a former spouse’s or widow(er)’s pension under most scheme rules, unless that entitlement is specifically preserved by a court order. To protect future retirement income post-divorce, the most common arrangement in England and Wales is a pension sharing order, which achieves a clean break in respect of the pension or pensions.
A percentage of one person’s pension is transferred into a separate pension pot in the name of the other person. From that point onwards, each person has their own independent pension provision.
A potential problem can arise if death of one person occurs before a pension sharing order is fully implemented, which may mean the pension share never takes effect and the other person could face unexpected challenges.
Another approach, often used where the family home is the largest single asset, is pension offsetting. Rather than dividing the pension itself, the parties agree to balance its value against other assets. For example, one spouse keeps their pension intact while the other takes a larger share of the equity in the house, or of the parties’ savings.
Offsetting can be attractive because each party walks away with the asset they value most, and it avoids the cost and complexity of formally splitting a pension scheme. The calculations, however, are rarely as simple as they look as a pound of pension capital is not the same as a pound of cash or equity in a house, because of tax treatment, liquidity, and the timing of when the money actually becomes available. Specialist actuarial advice is usually essential to make sure the trade is genuinely fair.
An older, less commonly used arrangement, known as pension attachment (sometimes called an “earmarking” order), can work differently. Under these, the ex-spouse may receive a portion of pension benefits as and when they are paid out, maintaining a financial connection between the former spouses. They were once routinely used to give a former spouse an ongoing share of pension income in retirement, but this ongoing link can create complications in the years that follow, particularly where circumstances change, people remarry, or estate planning comes into focus. Now that pension sharing is available, they are only used in niche situations where pension sharing is not possible or not the right answer.
Legal experts say the rise in financial remedy applications also highlights the risks of informal arrangements or attempts to resolve complex financial matters without proper advice.
While no-fault divorce has simplified the process of ending a marriage, it does not automatically put an end to financial claims between spouses. Without a formal financial order approved by the court, claims may be brought even after the divorce itself has been finalised.
With economic pressures continuing to shape how couples approach separation, ensuring pension arrangements are properly understood and documented is likely to become an increasingly important part of the process of dealing with finances on divorce.
For further information on any of these issues, please contact 01256 844888 or email enquiries@lambbrooks.com
This article was originally written by LawNet and has been republished here with permission.
