posted 23rd January 2026
Pensions are often the largest asset in a divorce after the family home, yet they are also the least understood. One of the most common questions I am asked is not “how does a pension sharing order work now?” but:
“What will actually happen when I retire?”
This article explains, clearly and practically, how a pension sharing order affects retirement income, including drawdown, annuities, lump sums and timing. It is written for people who already have (or are considering) a pension sharing order and want to understand what life looks like after the paperwork is done.
This article is provided for general information only and does not constitute legal or financial advice.
1. What is a Pension Sharing Order
A pension sharing order (PSO) is a court order made on divorce that splits a pension at the point of divorce, creating a clean break.
Instead of one party keeping the pension and the other being compensated elsewhere, a percentage of the pension is transferred to the other spouse. That percentage is called the pension sharing percentage.
Once implemented:
• The pension is divided permanently
• Each party has their own separate pension pot
• Each party controls when and how they take benefits
• There is no ongoing financial link
This clean-break aspect is crucial when we look at what happens at retirement.
2. What actually gets split?
The court orders a percentage of the Cash Equivalent Transfer Value (CETV) of the pension at the time of divorce.
Important points:
• The CETV is a valuation, not cash
• The pension is not paid out at divorce
• The split happens inside the pension scheme
Once the pension sharing order is implemented, the recipient receives a pension credit and the original member’s pension is reduced by a pension debit.
From that moment on, the two pensions are legally and financially independent.
3. After the order: whose pension is it?
This is where many people are understandably confused.
Once the pension sharing order is implemented:
• The recipient’s share becomes their pension
• It is no longer linked to the former spouse
• The former spouse has no say in how or when it is taken
• Death of either party does not affect the other’s pension
In other words, from a retirement perspective, the pension behaves exactly like any other personal pension.
4. When can each party take their pension?
Each party can take their pension in accordance with pension rules, not the divorce order.
Currently (subject to change by government):
• Most private pensions can be accessed from age 55 (rising to 57 in 2028)
• Defined benefit (final salary) schemes usually have a scheme retirement age
Crucially:
• One party retiring does not force the other to retire
• One party taking benefits does not affect the other’s income
• There is no requirement for pensions to be taken at the same time
This is a common misconception and often causes unnecessary anxiety.
5. What happens if one party has already retired?
A pension sharing order can still be made even if:
• One party has already started drawing their pension
• The pension is partially or fully crystallised
What matters is:
• The CETV at the time of the order
• The rules of the particular scheme
At retirement:
• The member continues with their reduced pension
• The recipient has their own pension credit, which may need to be transferred to a new scheme before it can be accessed
6. Crystallised vs uncrystallised pensions at retirement
People often ask whether it matters that a pension was already “crystallised”.
In simple terms:
• A pension is uncrystallised if no benefits have yet been taken from it
• A pension becomes crystallised when benefits are accessed for the first time, for example by taking a tax-free lump sum, moving funds into drawdown, or starting an annuity
Once crystallised, some or all of the pension has been designated for payment and the tax-free lump sum entitlement has usually been used (in full or in part).
In practical retirement terms:
• Once the pension sharing order is implemented, the distinction largely falls away
• Each party’s pension is treated independently
The recipient’s pension credit:
• Is usually uncrystallised when received
• Can be crystallised in the normal way later
• Will have its own tax-free lump sum entitlement
This means the recipient is not penalised simply because the original pension holder had already started taking benefits.
7. Pension drawdown after a pension sharing order
If a pension is in flexi-access drawdown, the impact of a pension sharing order is straightforward in principle:
• The original pension holder’s drawdown fund is reduced
• Their future income potential reduces accordingly
• The recipient gets a separate pot which they can:
o Leave invested
o Move into drawdown
o Take lump sums from later
At retirement:
• Each party chooses how much income to take
• One party drawing heavily does not affect the other
• Investment risk is borne separately by each individual
This independence is often a relief to clients.
8. Annuities after a pension sharing order
If either party chooses to buy an annuity:
• The annuity is based only on their own pension pot
• Rates depend on age, health and market conditions at the time
• There is no obligation to mirror the other party’s decisions
For example:
• One party may choose a guaranteed income for life
• The other may remain invested in drawdown
Again, there is no ongoing financial connection.
9. Tax-free lump sums at retirement
Each party is entitled to a tax-free lump sum (usually up to 25%) based on their own pension value at the time they crystallise benefits.
Key points:
• The lump sum entitlement is recalculated post-divorce
• The recipient gets their own tax-free allowance
• The original member’s tax-free lump sum reduces proportionately
This is often overlooked when people are negotiating settlements.
10. Income tax at retirement
Income tax works exactly as it would for any pension holder:
• Pension income is taxed as income
• Each party uses their own personal allowance
• Tax rates depend on total income in that tax year
Importantly:
• There is no tax interaction between ex-spouses
• One party’s income tax position does not affect the other
11. Death benefits after retirement
After a pension sharing order:
• Each party can nominate their own beneficiaries
• Death benefits do not pass to the former spouse unless chosen
• The pension is treated as a standalone asset
What this means in practice — and why it is a benefit
A pension sharing order severs the financial link between former spouses not only during life, but also on death. Each party’s pension becomes part of their own estate planning.
This has several important advantages:
• Each person can decide who benefits from their pension on death, whether that is children, a new partner, or other dependants
• There is no risk that a former spouse will receive pension death benefits unintentionally
• Future life choices — including remarriage or further children — can be reflected in beneficiary nominations without restriction
By contrast, older arrangements such as pension attachment orders left the parties financially connected, meaning death benefits could remain tied to an ex-spouse for many years.
From a long-term planning perspective, the ability to control death benefits independently is one of the most significant and often overlooked benefits of a pension sharing order.
12. Why retirement outcomes can never be identical
Even with a carefully calculated pension sharing percentage, outcomes at retirement may differ because of:
• Different retirement ages
• Different investment choices
• Different drawdown strategies
• Different tax positions
• Different health and longevity
The court’s objective is fairness at the point of division, not identical future income streams.
This is an important expectation to manage during mediation.
13. Why exact future income figures are rarely known at divorce
Clients are often frustrated that we cannot say:
“You will get £X per month at retirement.”
The reality is that future pension income depends on variables that simply cannot be fixed at divorce, including:
• Investment growth
• Inflation
• Annuity rates
• Future legislation
• Individual retirement choices
14. The role of expert advice
Where pensions are significant, particularly if:
• One party is close to retirement
• There are multiple schemes
• There are defined benefit pensions
• Equality of income (not capital) is the aim
…it is often appropriate to obtain a PODE (Pension on Divorce Expert) report.
A PODE can:
• Model likely retirement outcomes
• Compare drawdown and annuity scenarios
• Stress-test fairness
However, even expert reports cannot guarantee outcomes — they inform decisions, they do not predict the future.
15. Key takeaways
To summarise:
• A pension sharing order creates a clean break
• Each party has their own pension after divorce
• Retirement decisions are independent
• Income, tax and death benefits are separate
• Exact retirement income cannot be guaranteed
• Fairness is assessed at the time of divorce, not retirement
Understanding this helps people negotiate realistically and avoid unnecessary conflict.
Final thought
Pensions are not just numbers on a form — they are future security. A well-structured pension sharing order allows both parties to move forward with clarity and independence.
If you are negotiating a financial settlement and pensions are involved, it is vital to understand not just what is happening now, but what it means for later life.
That understanding often makes agreement possible
