In our experience at Tragear & Harris Lawyers, pensions are the most consistently undervalued asset in divorce proceedings. Clients frequently arrive having agreed, in principle, that one party will retain the family home while the other keeps their pension — without any professional valuation of either asset. In high-net-worth cases, this can result in settlements that are wildly unfair to one party.
The problem stems partly from how pension values are presented. A pension statement showing a 'fund value' or 'cash equivalent transfer value' (CETV) can look modest compared with a property asset — but CETVs are frequently an underestimate of the true economic value, particularly for defined benefit (final salary) schemes. In some cases, the actual economic benefit of a defined benefit pension is two or three times the stated CETV.
Where a pension is a material asset in the matrimonial pot, we always recommend obtaining a formal report from a Pension on Divorce Expert (PODE). These actuarial experts can advise on the true value of each party's pension rights, the most appropriate sharing method (offsetting, earmarking, or pension sharing order), and the tax implications of different outcomes.
Pension sharing orders — which create a new pension in one spouse's name using a proportion of the other's fund — have become the preferred mechanism in most cases since they achieve a clean break. However, the mechanics vary significantly depending on the scheme type, and some schemes impose substantial charges on pension sharing that can affect the economics of the settlement.
If you are approaching divorce proceedings and pensions are likely to be in play, our strong advice is to take specialist legal advice before agreeing anything in principle. Decisions made early — even informally — can be very difficult to unpick later. The team at Tragear & Harris Lawyers works closely with accredited PODE experts and can guide you through this complex area with clarity and discretion.