Pension Sharing Order

Pension Sharing Order
Pension Sharing Order
Full Overview Of Pension Sharing Order

Pension Sharing Orders (PSOs) play a crucial role in family law, especially in divorce cases and civil partnerships dissolution. They offer a fair way to divide pension benefits, ensuring both parties receive an equitable share of the pension assets accumulated during the marriage or partnership.

At DLS Solicitors, we recognise the importance of understanding the complexities of pension-sharing orders in order to make well-informed decisions during divorce proceedings. This comprehensive overview aims to clarify the purpose, structure, benefits, and legal considerations of pension-sharing orders.

What is a Pension Sharing Order?

A pension sharing order is a court order issued during divorce or civil partnership dissolution proceedings. It allows pension assets to be divided between the parties and provides a clean break, enabling both parties to have their own pension funds independently. This means they won’t have to rely on one partner’s future pension benefits. The pension assets are split at the time of the order, with a specified percentage or amount transferred from one party’s pension fund to the other.

Fundamental Elements of a Pension Sharing Order

  • Pension Holder: The individual who originally owns the pension assets.
  • Recipient: The former spouse or civil partner who will receive a portion of the pension assets.
  • Pension Sharing Percentage: The specified percentage or amount of the pension assets to be transferred.
  • Pension Credit: The amount or value of the pension assets awarded to the recipient.
  • Pension Debit: The amount or value deducted from the pension holder’s pension fund.

Purpose and Uses of Pension Sharing Orders

Pension Sharing Orders serve several important purposes, particularly in the context of financial settlements during divorce or dissolution:

Fair Division of Assets

PSOs ensure a fair division of pension assets accumulated during the marriage or civil partnership, recognising the contributions of both parties.

Financial Independence

By splitting pension assets, PSOs provide both parties with their own pension funds, promoting financial independence and security in the future.

Clean Break

PSOs facilitate a clean break between the parties, allowing them to move forward independently without being tied to each other’s future pension benefits.


PSOs promote equality by ensuring that both parties receive a fair share of the pension assets, regardless of who originally accumulated them.

Creating a Pension Sharing Order

Establishing a Pension Sharing Order involves several critical steps, each requiring careful consideration and, often, professional legal advice:

Valuation of Pension Assets

The first step is to value the pension assets to determine their current value. This may involve obtaining a Cash Equivalent Transfer Value (CETV) from the pension provider.

Agreement Between Parties

Both parties need to agree on the division of the pension assets. This can be negotiated directly, through mediation, or with the assistance of legal advisors.

Court Application

Once an agreement is reached, a Pension Sharing Order application is submitted to the court. This is typically done as part of the overall financial settlement during divorce or dissolution proceedings.

Court Decision

The court will review the application and issue a Pension Sharing Order if deemed fair and reasonable. The order will specify the percentage or amount of the pension assets to be transferred.


The pension provider is then responsible for implementing the Pension Sharing Order, transferring the specified amount or percentage of the pension assets to the recipient.

Benefits of Pension Sharing Orders

Pension Sharing Orders offer several significant advantages, particularly in terms of financial fairness and independence:

Fair Distribution

PSOs ensure a fair and equitable distribution of pension assets, recognising the contributions of both parties during the marriage or civil partnership.

Financial Security

By dividing pension assets, PSOs provide both parties with their pension funds, ensuring financial security and independence in the future.

Clarity and Certainty

PSOs provide clarity and certainty regarding the division of pension assets, reducing potential conflicts and disputes between the parties.

Legal Protection

PSOs are legally binding court orders, providing legal protection and ensuring that the agreed-upon division of pension assets is enforced.


PSOs offer flexibility in how the pension assets are divided, allowing for tailored solutions that meet both parties’ specific needs and circumstances.

While Pension Sharing Orders offer numerous benefits, they also come with potential challenges and legal considerations:


PSOs can be complex, particularly when dealing with different types of pension schemes and varying rules regarding transfers and valuations. Professional legal and financial advice is often essential.


Obtaining a PSO can be associated with significant costs, including legal fees, court fees, and fees charged by pension providers for implementing the order.


Implementing a PSO can be time-consuming and may involve administrative challenges, particularly when dealing with multiple pension schemes or complex pension arrangements.

Tax Implications

PSOs can have tax implications, particularly regarding pension asset transfer and subsequent management. Considering these implications and seeking professional tax advice if necessary is important.

Changes in Circumstances

Changes in either party’s financial circumstances, such as changes in employment or pension scheme rules, can impact the division and management of pension assets.

Types of Pension Schemes and PSOs

Different types of pension schemes may be subject to Pension Sharing Orders, each with its own rules and considerations:

Defined Benefit Schemes

Defined benefit schemes provide a specified pension based on salary and years of service. Valuing and dividing these schemes can be complex, often requiring actuarial advice.

Defined Contribution Schemes

Defined contribution schemes are based on contributions made by the employer and employee, with the pension value dependent on the performance of the investments. These schemes are generally easier to value and divide.

Public Sector Schemes

Public sector schemes, such as those for civil servants, teachers, and NHS workers, have specific rules and regulations regarding PSOs. It is important to understand these rules and how they impact the division of pension assets.

Private Pensions

Private pensions, including personal and stakeholder pensions, can also be subject to PSOs. The process for valuing and dividing these pensions is generally straightforward, but it is essential to understand the specific terms and conditions of each scheme.

Implementing a Pension Sharing Order

The implementation of a Pension Sharing Order involves several key steps and considerations:

Notifying the Pension Provider

The pension provider must be notified of the PSO, and they will provide details of the implementation process, including any required forms and documentation.

Transfer of Pension Assets

The pension provider will transfer a specified percentage or amount of the pension assets to the recipient’s pension fund, which may involve setting up a new pension arrangement for the recipient.

Adjustments and Revaluation

The pension provider will adjust both parties’ pension benefits to reflect the asset transfer. This may involve revaluing the remaining pension assets and updating the records accordingly.

Ongoing Management

Both parties will need to manage their pension assets independently, considering factors such as investment choices, retirement planning, and potential tax implications.

Tax Implications of Pension Sharing Orders

Understanding the tax implications of Pension Sharing Orders is crucial for effective financial planning:

Income Tax

Pension income received by the recipient from their share of the pension assets is subject to income tax, based on their individual tax rate and circumstances.

Capital Gains Tax (CGT)

Transfers of pension assets under a PSO are generally exempt from Capital Gains Tax, but it is important to understand any specific rules and implications for individual cases.

Inheritance Tax (IHT)

Pension assets transferred under a PSO are usually outside the scope of inheritance tax, but the broader implications for estate planning and potential IHT liabilities must be considered.

Pension Contributions

Any ongoing contributions to the recipient’s new pension arrangement will be subject to standard tax relief rules, which could impact annual and lifetime allowances.

Applications of Pension Sharing Orders

Pension Sharing Orders are used in various contexts to achieve fair and equitable financial settlements during divorce or dissolution:


PSOs are a key component of financial settlements in divorce proceedings, ensuring that the parties fairly divide pension assets.

Civil Partnership Dissolution

PSOs play a similar role in dissolving civil partnerships, providing a mechanism for dividing pension assets, and ensuring financial fairness.

Separation Agreements

In some cases, PSOs may be included in separation agreements, providing a clear and enforceable framework for dividing pension assets without court intervention.

Post-Divorce Financial Planning

PSOs provide a foundation for post-divorce financial planning, allowing both parties to manage their pension assets independently and plan for their future financial security.


Pension Sharing Orders are powerful and flexible tools in family law. They provide a mechanism for fair and equitable division of pension assets during divorce or dissolution. They offer numerous benefits, including financial independence, clarity, and legal protection, making them valuable to financial settlements.

However, establishing and implementing a pension-sharing order requires careful consideration of the legal and financial implications. It is essential to seek professional legal and financial advice to ensure compliance with relevant laws and regulations and to achieve the best possible outcome.

At DLS Solicitors, we are committed to providing expert guidance and support to help our clients navigate the complexities of pension-sharing orders. Whether you are considering a PSO as part of a financial settlement or need assistance with implementing and managing a PSO, our experienced team is here to assist you every step of the way.

From valuing pension assets and negotiating agreements to submitting court applications and implementing the PSO, we ensure that your rights are protected and that the division of pension assets is fair and equitable. By understanding the intricacies of pension-sharing orders, you can make informed decisions and achieve financial security and independence.

If you have any questions or need assistance with pension sharing orders, please do not hesitate to contact us at DLS Solicitors. We are here to help you achieve your financial and legal objectives and effectively manage your pension assets.

Pension Sharing Order FAQ'S

A pension sharing order is a court order issued during a divorce or dissolution of a civil partnership that divides a pension scheme between the parties. It allows for a specified percentage of one partner’s pension to be transferred to the other partner.

Either party to a divorce or civil partnership dissolution can apply for a pension-sharing order. It must be part of the financial settlement agreed upon or ordered by the court.

The value of the pension is determined by its cash equivalent transfer value (CETV), which is provided by the pension scheme. The CETV represents the amount that would be paid if the pension benefits were transferred to another scheme.

Most types of pensions, including defined benefit schemes, defined contribution schemes, state pensions, and private pensions, can be subject to a pension sharing order. However, some state benefits, such as the basic state pension, cannot be shared.

Once the court issues a Pension Sharing Order, the pension scheme administrator is notified and required to implement the order. The specified percentage of the pension is then transferred into a pension scheme in the name of the receiving party.

No, once a pension sharing order is made and the decree absolute (or final order in the case of civil partnership dissolution) is issued, it cannot be varied or revoked. The order is final and binding on both parties.

The cost of implementing a pension sharing order varies depending on the pension scheme. The scheme administrator may charge a fee for processing the order, and legal fees may also be incurred. These costs are typically outlined in the scheme’s rules.

A pension sharing order reduces the pension benefits of the party whose pension is being shared. The receiving party gets a separate pension pot, which they can manage independently, potentially affecting their retirement planning and benefits.

A Pension Sharing Order transfers a portion of one party’s pension to the other party, giving them independent control over the received pension benefits. A Pension Attachment Order (also known as earmarking) directs the pension provider to pay a portion of the pension benefits to the ex-spouse or civil partner when they become payable.

Pension Sharing Orders are generally applicable only to UK pension schemes. Overseas pensions may not be directly subject to UK court orders, but their value can be considered when dividing other assets during divorce or dissolution.

Consulting a solicitor specialising in family law and pensions is recommended for specific advice and assistance with pension-sharing orders.


This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th July 2024.

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Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.

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