Case Study: Pensions in Divorce, and How a DB and DC Pension Can Be Shared Fairly (2026 Guide)

On divorce, a defined benefit (DB) pension and a defined contribution (DC) pension can each be split with a pension sharing order, or kept whole and balanced against other assets. Comparing a DB pension's transfer value with a DC pot's fund value at face value can be misleading, because the DB pension carries guarantees the pot does not. This illustrative example shows how a couple might approach it, and why a specialist valuation and regulated advice matter.

Quick summary

• Scenario: a divorce settlement that needs to deal with pensions
• Illustrative example: "Caroline", 52, a school business manager employed by a local authority, leaving a 28-year marriage
• Key issue: her Local Government Pension Scheme (LGPS) DB pension has a CETV of £380,000, while her husband's SIPP is worth £210,000. How can they be split fairly?
• Also involved: a pension sharing order on the LGPS pension and another on the SIPP
• Illustrative outcome: with specialist valuation, legal advice and negotiation, each pension is shared in different proportions, leaving both people with a broadly fair retirement position

Divorce is one of the most financially disruptive events in life, and when pensions are involved the complexity multiplies. Pensions are often the second largest asset in a marriage after the family home, yet many divorcing couples underestimate their value or don't deal with them properly in a settlement.

This hypothetical example illustrates how pension sharing on divorce works in practice, what the key decisions are, and why specialist legal and pension advice is so important at this stage of life.

All names and personal details in this example are fictional. It is for general education only and is not financial or legal advice.

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Background: Caroline and Richard

Imagine Caroline. She is 52 and works as a school business manager in the north of England, employed by the local authority. She has worked in local government for 28 years and is a member of the Local Government Pension Scheme (LGPS), a valuable defined benefit pension that will pay a guaranteed income in retirement based on her membership and pay.

Her husband Richard, 54, is a self-employed financial consultant. Over the years he has built up a self-invested personal pension (SIPP) from his own contributions and employer contributions from earlier jobs.

After a difficult two years, Caroline and Richard have decided to divorce. Their solicitors have explained that their pensions must be considered as part of the overall financial settlement.

Their pension position

• Caroline's LGPS DB pension: a Cash Equivalent Transfer Value (CETV) of £380,000. Projected income of about £17,200 a year from age 67, with a pension for a surviving spouse or partner.
• Richard's SIPP: a fund value of £210,000, invested across a range of equity funds.
• State Pension: both have near-full National Insurance records. Caroline's is slightly lower because she worked part-time when the children were young.

Important: a CETV is not the same as the full value of a defined benefit pension to the member. The CETV of Caroline's LGPS pension (£380,000) is the scheme's calculation of what it will pay out if she transfers. Her pension, with its inflation-linked guaranteed income and survivor's pension, could be worth considerably more to her over a retirement that may last 30 years or more. A pensions on divorce expert can help put a figure on this. Our guide to the transfer value of a pension explains how CETVs are worked out.

The key questions

Caroline has several pressing questions about her pension during the divorce:

1. Should pensions be divided 50/50?
2. Can a DB pension like the LGPS be shared on divorce?
3. What is a pension sharing order, and how does it work?
4. Is offsetting the pension against other assets, such as the house, a better option?
5. What are the tax implications of pension sharing?
6. When is regulated pension transfer advice needed?

How pensions can be dealt with on divorce

In England and Wales (Scotland has its own system), there are three main ways to deal with pensions on divorce. MoneyHelper has a clear overview.

1. Pension sharing orders

A pension sharing order (PSO) is a court order that transfers a set percentage of one spouse's pension rights to the other. It is the most common way to deal with pensions. The receiving spouse gets their own independent pension, so they don't depend on the other person dying or retiring.

For a DB pension like Caroline's LGPS, the receiving spouse (Richard) would get a "pension credit": his own deferred pension in the LGPS. In a funded scheme like the LGPS, he could ask about transferring that credit to a personal pension instead, if the scheme rules allow, but that would need regulated advice if the value is over £30,000.

For Richard's SIPP, a PSO would move a percentage of the fund into a pension in Caroline's name.

2. Pension offsetting

Here, one person keeps their pension in full and the other receives a bigger share of other assets, typically the family home, to compensate. This is simpler to administer, but it needs a careful valuation to make sure the trade is fair. A DB pension with a £380,000 CETV is not necessarily worth the same as £380,000 of equity in a house.

Key point: the CETV of a DB pension may understate what the pension is worth to the member. In divorce cases, an actuarial valuation from a pensions on divorce expert often produces a higher figure than the CETV alone. Caroline's LGPS pension, for example, could be worth significantly more than £380,000 on that basis, because of its inflation protection and the fact that it pays for life.

3. Pension attachment orders (earmarking)

These are less common and generally less favoured. Part of the pension income or lump sum is paid to the former spouse when the pension is eventually drawn. The drawbacks include the receiving spouse staying dependent on the other person's retirement decisions, and the order usually ending if the receiving spouse remarries.

Looking at Caroline and Richard's pensions

To work out the fairest approach, several factors would be considered.

What Caroline's LGPS pension is worth to her

With a CETV of £380,000 and projected income of £17,200 a year from 67, Caroline's pension provides:

• a guaranteed income for life that increases with inflation
• a pension for a surviving spouse or partner
• a lump sum and survivor's pension if she dies while still working
• the backing of a statutory scheme funded by local government employers (the LGPS is not covered by the Pension Protection Fund, because it is backed by statute instead)

In this example, an actuarial report puts the value of Caroline's LGPS pension at about £490,000 to £510,000, well above its CETV of £380,000. That distinction matters when comparing it with Richard's SIPP (£210,000), which carries full investment risk and no guarantee.

Comparing DB and DC: apples and oranges

It would be too simple to compare £380,000 (the CETV) with £210,000 (the SIPP) and conclude that Caroline has more. The two assets are fundamentally different:

Feature	Caroline's LGPS (DB)	Richard's SIPP (DC)
What it is	A guaranteed income for life	An investment fund that goes up and down
Quoted value	£380,000 CETV	£210,000 fund value
Actuarial value (example)	about £490,000 to £510,000	£210,000
Investment risk	Carried by the scheme	Carried by Richard
Inflation protection	Increases in line with CPI under the scheme rules	Depends on investment choices
Risk of living longer than expected	Carried by the scheme	Carried by Richard (the fund could run out)
Death benefits	Survivor's pension and, in some cases, a lump sum	Remaining fund to chosen beneficiaries*

*Unused pension funds and most pension death benefits are due to come into the scope of inheritance tax from 6 April 2027.

The settlement approach in this example

After specialist advice and negotiation between the solicitors, with actuarial input on the LGPS value, this is the approach agreed in the example.

Step 1: a pension sharing order on the LGPS pension (Caroline to Richard)

A pension sharing order is applied to Caroline's LGPS pension. Richard receives a 22% pension credit, reflecting the difference in value between the two pensions. This gives him his own deferred pension in the LGPS. He could take it from the scheme's earliest payment age with a reduction for early payment (the normal minimum pension age is 55, rising to 57 on 6 April 2028), or in full at the scheme's normal pension age.

Richard's pension credit: about £3,784 a year from 67 (22% of Caroline's projected £17,200).

Step 2: a pension sharing order on the SIPP (Richard to Caroline)

A pension sharing order is also applied to Richard's SIPP. Caroline receives a 35% pension credit, £73,500, which moves into a new personal pension in her own name. She invests it in a low-cost, diversified way that suits the 15 years she has before retirement.

Key point: when a pension credit comes from a DC pension such as a SIPP, it goes into a pension in the receiving person's own name. They are fully independent of their former spouse for that pension. They choose their own investments, can usually access it from the normal minimum pension age (55 now, rising to 57 on 6 April 2028), and nominate their own beneficiaries.

Step 3: projected retirement income

After the settlement, both Caroline's and Richard's projected incomes are modelled. These figures are illustrative only and use 2026/27 State Pension rates.

Caroline:

• LGPS (78% of her original pension): about £13,416 a year from 67
• Personal pension (the credit from Richard, after 15 years of possible growth): perhaps £4,800 to £7,200 a year of income
• State Pension (full or near-full): up to about £12,548 a year
• Total projected income: about £30,800 to £33,200 a year

Richard:

• SIPP (65% of the original, with 13 years of further contributions and possible growth): perhaps £10,000 to £14,000 a year in drawdown
• LGPS pension credit: about £3,784 a year from 67
• State Pension: up to about £12,548 a year
• Total projected income: about £26,300 to £30,300 a year

In this example, both people end up in a broadly fair position. Caroline's more valuable DB pension is partly shared and Richard's SIPP is partly shared, reflecting the different risks and actuarial values involved. Investment returns are not guaranteed, so the DC figures could be higher or lower.

Key points to consider in pension divorce cases

1. A pensions on divorce expert (PODE) report

Where pension assets are significant, both solicitors may suggest commissioning a report from a pensions on divorce expert. This gives an actuarial view of what DB pensions are worth (not just the CETV) and suggests sharing percentages to achieve the outcome the couple or court is aiming for. Courts often expect this kind of report in complex cases.

2. The Lump Sum Allowance

The Lifetime Allowance was abolished from 6 April 2024. It was replaced by the Lump Sum Allowance (£268,275) and the Lump Sum and Death Benefit Allowance (£1,073,100). Tax-free cash is generally 25% of a pension, up to the Lump Sum Allowance. Receiving a pension credit doesn't use up any allowance when it is transferred, but when either person later takes tax-free cash, it will count towards their own allowance. Gov.uk explains the allowances.

3. The 2027 pension IHT changes

Unused pension funds and most pension death benefits are due to come into the scope of inheritance tax from 6 April 2027. This affects how DC pensions like SIPPs are viewed in a settlement, as they will be less efficient for passing on wealth than they once were. It is also relevant when comparing the death benefits of DB and DC pensions.

Important: pension sharing on divorce is complex and every situation is different. An approach that suits one couple may be wrong for another. This example shows one possible outcome, not a template. Take independent legal advice from a family solicitor, and regulated financial advice, before making decisions.

4. Timing and how long a CETV is guaranteed

A CETV from a DB scheme is guaranteed for three months from its guarantee date, and members are usually entitled to one free statement every 12 months. If proceedings drag on, a new CETV may be needed for some purposes, and the figure can change when gilt yields or scheme assumptions move. This can add uncertainty and delay.

5. Transferring DB benefits needs regulated advice

If Richard wanted to transfer his LGPS pension credit out of the scheme, rather than keeping it as a deferred pension, he would legally need regulated advice first, because its value is over £30,000. That advice must come from an FCA-authorised firm with the pension transfer permission. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people, so keeping DB benefits is often the likely outcome of that advice.

Pension credits in unfunded public-sector schemes, such as the NHS, Teachers', Police, Firefighters', Civil Service and Armed Forces schemes, generally cannot be transferred to a DC pension at all. The LGPS is funded, so transfers out are possible. Our page on public-sector pensions explains the difference.

Lessons from Caroline's example

Looking back, these are the lessons Caroline's situation highlights:

1. Get specialist help early, not just general financial guidance. Pensions on divorce need knowledge of DB and DC schemes, actuarial valuations and the legal framework around pension sharing orders.
2. Don't compare CETVs at face value. A DB pension with a £380,000 CETV and a SIPP worth £380,000 are fundamentally different assets with different risks and values.
3. Consider a PODE report where a large DB pension is involved. It has a cost, so get a quote, but it can lead to a much fairer settlement that reflects what both pensions are really worth.
4. Allow for future contributions. Richard is still self-employed and likely to keep building his SIPP. That can be considered in the overall settlement.
5. Check for State Pension gaps. Caroline has some gaps from part-time working years, so she could look at whether paying voluntary National Insurance contributions would increase her State Pension. Get a forecast first, as extra years don't always help.

Getting help with pension sharing

Pensions on divorce are among the most complex financial matters people face. Whether you are sharing your pension or receiving a share, clear guidance helps protect your long-term security.

Alongside your solicitor, a regulated financial adviser can help you:

• understand the value of a defined benefit pension compared with a DC pension
• look at how different sharing arrangements affect retirement income
• consider whether transferring a pension credit is appropriate, which for DB benefits worth more than £30,000 must involve a firm with the pension transfer permission
• work through the CETV and pension sharing process with your legal team
• check your State Pension position and any National Insurance gaps
• plan your overall retirement after the divorce

Free, impartial guidance is available from MoneyHelper, and if you're 50 or over you can book a Pension Wise appointment about your DC pensions. Be wary of anyone who contacts you out of the blue offering to "unlock" or move a pension, and check the FCA's ScamSmart pages first.

I don't give pension transfer advice. If you have a DB pension or a DB pension credit and want to understand how transfers and the advice process work, you can book a free, no-obligation chat. It's general information, not advice. If you then want regulated advice, I can introduce you to an FCA-authorised firm that holds the pension transfer permission. Arthur Browns may receive a fee from the firm we introduce you to if you become their client. Introductions are for UK residents with a transfer value of £50,000 or more.

The decisions made during divorce proceedings can affect your retirement for decades, so this is not an area to navigate alone.

Frequently asked questions

How are pensions divided in a divorce in the UK?

In England and Wales, pensions can be dealt with through a pension sharing order (a court order moving a percentage of one spouse's pension to the other), pension offsetting (one person keeps their pension and the other receives more of the other assets, such as the home), or a pension attachment order (directing part of future pension payments to the former spouse). Pension sharing orders are the most common, because each person ends up with an independent pension.

Can a defined benefit pension be shared on divorce?

Yes. A pension sharing order can apply to a defined benefit or final salary pension. The receiving spouse gets a "pension credit", which is usually their own deferred pension in the scheme. In some funded schemes they can ask about transferring it to a personal pension instead. Because a DB pension pays a guaranteed income, its value to the member can be higher than the CETV, so an actuarial report is often used to value it for divorce.

Is a CETV the true value of a pension in divorce?

A Cash Equivalent Transfer Value (CETV) is the amount a DB scheme would pay if a member transferred out. It does not necessarily reflect what the pension is worth to the member for divorce purposes. The guaranteed income, inflation protection and survivor's pension can make its actuarial value higher than the CETV. A pensions on divorce expert (PODE) report can give a more complete picture.

Do I need pension transfer advice during a divorce?

Sharing a pension through a court order does not by itself need pension transfer advice. But if you want to transfer a defined benefit pension, or a DB pension credit, worth more than £30,000 into a DC pension, the law requires you to take advice from an FCA-authorised firm with the pension transfer permission first. A regulated adviser can also help both people understand their pensions and how a settlement affects retirement income.

What happens to a SIPP or personal pension in a divorce?

A SIPP or personal pension is a matrimonial asset and must be considered in the financial settlement. A pension sharing order can move a percentage of the fund to a pension in the other person's name. The recipient then has an independent pension, with their own investment choices and beneficiary nominations. Valuing a SIPP is simpler than valuing a DB pension, because the fund value is used, but both people should bear in mind that a DC pension carries investment risk that a guaranteed DB income does not.

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This is an illustrative example. Caroline and Richard are hypothetical, and all figures are examples only, based on assumptions that may not apply to you. Nothing in this article is financial or legal advice, or a recommendation to transfer or keep any pension. Please read our important information.