- 19 August 2025
Pension sharing vs. pension offsetting: What’s best in your divorce?
Dividing marital assets during a divorce can be complex, and one of the most valuable is often overlooked - pensions. Two methods regularly considered to ensure a fair split are pension sharing and pension offsetting. Understanding the difference between these approaches can help you make informed decisions for your future.
What is pension sharing?
Pension sharing involves splitting one or both partners’ pension funds at the time of divorce. This means that a portion of the pension is transferred from one spouse to the other, giving each person direct control over their share. The person receiving the pension share can keep it in the same scheme or transfer it to a new plan in their name. Pension sharing offers a clean break, allowing both parties to move forward independently with their respective pension pots.
What is pension offsetting?
Pension offsetting takes a different approach. Instead of dividing the pension itself, its value is balanced against other marital assets. For example, one partner might keep the full pension while the other receives a larger share of the family home or other assets to offset the pension’s value. This method can be helpful if one party prioritises immediate access to cash or property over future pension income. However, it relies on accurate valuations and careful negotiation to ensure fairness.
Pros and cons of each method
Both pension sharing and pension offsetting come with advantages and drawbacks. Pension sharing provides long-term security and independence, as both parties end up with their own retirement savings. However, the process can be complex. In contrast, pension offsetting can be more flexible and may suit those who wish to retain other assets, but it can be risky if the non-pension assets fluctuate in value or are more difficult to liquidate in the future.
How to choose the best option
The right choice depends on your individual circumstances, including your age, retirement plans, and the nature and value of your assets. Consulting with an expert is crucial. At Pensions & Divorce, we can help you understand the implications of each route and create a settlement that best protects your financial future.
Ultimately, whether you opt for pension sharing or pension offsetting, the goal is to achieve a fair and equitable split. Careful planning and professional advice can ensure that both parties leave the marriage with the security they need for the next chapter of their lives.
Book your free engagement meeting today to discuss your individual circumstances.