Introduction

For many professionals in the public sector, in the armed forces, NHS, police, fire and emergency services, or in teaching, the pension is one of the most valuable assets they hold – sometimes worth more than the family home. Most public service pensions are defined benefit schemes.   This means they provide a guaranteed income for life based on salary and length of service. That income is usually index-linked (rising in line with inflation) and may include survivor benefits. Unlike defined contribution pensions, where retirement income depends on investment performance, defined benefit schemes offer certainty. That certainty carries significant long-term financial value.   When couples begin working through the financial considerations of getting divorced, pensions should be addressed early and properly, not left until the end of negotiations.

Are public service pensions included in divorce settlements?

Yes. Under the Matrimonial Causes Act 1973, the court has wide powers to divide assets fairly between spouses. Section 25 of the Act sets out the factors the court must consider, including:   

• income
• earning capacity
• financial needs
• age
• duration of marriage  

Pensions fall squarely within those considerations and are treated as part of the overall calculation alongside property, savings and investments. There is no automatic protection simply because a pension was earned through public service or is held in one person’s name.  

In practice:

Pension benefits built up during the marriage are usually treated as matrimonial assets

Pre-marital accrual – pensions built up before the person got married - may still be relevant, particularly for longer marriages, and the court may prioritise needs over strict accounting

The court gives particular weight to long-term retirement provision, especially where one person has (or has had) limited earning capacity.   

The court’s objective is focused on balancing fairness and certainty in how assets are divided. In many cases, particularly where there is income disparity or one spouse has taken time away from work while raising a family, equalising pension provision can be central to achieving a fair outcome.  

In financially complex cases, including high-net-worth divorces, pensions can represent a substantial proportion of total wealth. Ignoring or undervaluing them could skew the whole settlement.

Valuing a public service pension

In divorce proceedings, pensions are usually valued using the Cash Equivalent Transfer Value (CETV). This is a capital figure calculated to represent the estimated cost of providing the person’s future pension benefits.  

The CETV is calculated using ‘actuarial assumptions’ – specialist financial modelling carried out by actuaries (pension valuation experts) who assess factors such as life expectancy, inflation and interest rates. Since it relies on projected assumptions, the CETV does not always reflect the full picture in terms of long-term security as it cannot ‘guarantee’ the practical value of a defined benefit pension.  

In more complex cases – particularly where both individuals have defined benefit schemes or where retirement ages differ significantly – a jointly instructed actuary may prepare a detailed report under what is known as a ‘Pensions on Divorce Expert’ (PODE) instruction. This allows pensions to be compared on a like-for-like basis and can assist the court in deciding what division would be fair.  

Note: CETV figures are normally guaranteed for three months. If a valuation expires and is not refreshed, negotiations risk being based on inaccurate data.

It is also important to distinguish between the ‘capital value’ of a pension and the projected annual retirement income. Two pensions with seemingly identical CETVs could actually generate very different levels of future income. Courts increasingly focus on income equality rather than capital equality, particularly when a couple has been married a long time. Where pension provision forms a substantial part of the overall assets, specialist advice is often essential to avoid imbalance.

Why public service pensions are complex

Public service pension schemes operate under statutory rules and internal regulations that differ from most private sector pensions. Each scheme has its own accrual structure, lump sum allowances, retirement age provisions and survivor benefit rules. These features can materially affect both valuation and division during divorce proceedings.

Armed Forces pension scheme (AFPS)

Military pensions often include enhanced accrual rates for long service and provisions allowing retirement much earlier than the standard state pension age. Some schemes contain immediate pension entitlements after a defined period of service. The interaction between length of service, rank progression and retirement age can significantly influence valuation, meaning specialist actuarial input is usually required.  

NHS pension scheme

The NHS Pension Scheme contains multiple sections (1995, 2008 and 2015), each with different accrual rates, retirement ages and ‘transitional protections’.1 It also includes benefits for ill-health retirement and survivor pensions – ongoing pension income paid to a spouse, civil partner (or sometimes even a dependent child) after the pension holder dies. These structural differences affect both the CETV and projected retirement income.   Transitional protections are safeguards put in place when pension scheme rules change, particularly when members are moved from one section of the scheme to another (for example from the 1995 or 2008 section into the 2015 scheme). These were designed to ensure that members of the scheme who were closer to retirement were not disadvantaged by rule changes, such as later retirement ages, different accrual rates or changes in how benefits would be calculated.

Police and Firefighters’ pension schemes

Police and Firefighters’ schemes often incorporate early retirement features and guaranteed income elements that do not translate neatly into simple capital values. The defined benefit structure means that comparing CETV figures alone may not reflect the practical long-term income position.   Across all public service schemes, three recurring challenges arise:  

• Valuation: Defined benefit pensions are assessed using a CETV, as explained, but this capital figure does not always equate to the true lifetime income provided.      
• Illiquidity: Benefits are not generally accessible as flexible lump sums in the way that defined contribution pensions (such as many private workplace or personal pensions) can be.
• Scheme restrictions: Rules governing retirement age, implementation timescales and benefit structure may affect how pension sharing or court orders operate in practice.   

Due to these complexities, public service pensions require handling by advisers experienced in defined benefit pension division and financial remedy proceedings. Our ecosystem of care at K J Smith Solicitors gives you direct access to the network of professionals you may need in order to achieve a fair and just settlement.

The legal mechanisms for dividing pensions

There are three main approaches:  

1. Pension Sharing Orders

Pension sharing was introduced under the Welfare Reform and Pensions Act 1999 and remains the most common mechanism. A Pension Sharing Order divides the pension at the point of divorce. A specified percentage of the pension’s value is transferred into a separate pension arrangement for the other spouse. The percentage is determined by negotiation or, if needed, by the court. Once shared, each person has their separate pension rights going forward.   For example, if the pension is valued at £600,000 and the court orders a 30% share, £180,000 becomes the ex-spouse’s pension credit.   Key points:   

• The court must approve the Pension Sharing Order
• It cannot take effect until the Final Order has been granted
• A Pension Sharing Annex (Form P1) must accompany the financial order
• Once the Final Order is granted and the sealed order is served on the pension scheme, the scheme provider has up to four months to implement the transfer 
• Pension scheme providers are permitted to charge administrative fees – these are often shared by the separating couple
• Once implemented, the pension share becomes legally separate and cannot be reversed  

This approach enables a clean financial break and is by far the most common method used in cases involving public service pensions.  

Note: If a Final Order is granted before a Pension Sharing Order is sealed by the court, certain widow’s or widower’s benefits may be lost, so the timing is important.  

2. Offsetting

Offsetting allows one of you to keep a pension intact while the other receives a greater share of another asset – often the family home. This kind of settlement must be handled carefully and you should always seek professional advice. A defined benefit pension provides long-term retirement income. A property provides housing security, but not income. Replacing guaranteed pension income later in life can be costly and, in some cases, unrealistic.

Offsetting is not simply a mathematical swap. The liquidity, tax treatment and risk profile of the assets differ significantly. A £200,000 pension fund is not financially equivalent to £200,000 in property equity.   Any offsetting agreement must be incorporated into a court-approved financial order (a Consent Order) to be legally binding. Informal agreements about “trading” pension rights have no legal standing and cannot be enforced later. In a climate where many families are already managing wider pressures – including those considered when financing divorce during a cost-of-living crisis – pension offsetting decisions must be made with care.  

3. Attachment Orders

Attachment Orders (formerly known as ‘earmarking’) remain legally available under the Welfare Reform and Pensions Act 1999. They direct the pension scheme to pay part of the pension income or lump sum to the former spouse when the pension holder retires.  

There are some drawbacks to this approach:   

• The recipient does not receive an independent pension pot
• Payment begins only when the pension holder retires
• If retirement is delayed, payment is delayed
• Financial ties continue between former spouses
• Death before retirement may affect entitlement  

For defined benefit public service schemes, attachment orders are now less common because they don’t provide a clean break, instead creating ongoing financial ties.

Common pension misconceptions

“I’ll keep my pension and you keep the house.”

A public service pension may provide inflation-linked income for decades. A house provides housing security but NO retirement income.   Selling property later to fund retirement does not automatically replicate the value of a defined benefit pension. These decisions require proper valuation and structured legal advice.  

“We can deal with the pension later.”

Pension division requires a court order. It cannot be implemented privately. If a Final Order is granted without a Pension Sharing Order in place, the marriage is legally dissolved. While financial claims technically remain open until dismissed, the practical and procedural position becomes more complex.   In some circumstances, remarriage can also affect the ability to pursue certain financial claims if they have not been resolved beforehand.  

A clean break

The court has a duty, where appropriate, to consider whether a clean break between parties is possible. A Pension Sharing Order is often the most effective route to achieving this where public service pensions are involved. Without proper provision, one person could face retirement insecurity several years, perhaps even decades, later. The financial consequences of a poorly structured agreement may not become apparent until it is much too late to correct the issue. That’s why seeking legal advice early on is so important.   Some couples choose a cooperative path such as mediation or collaborative divorce, where both partners and their advisers agree to resolve pension issues and other financial matters without recourse to court hearings. This may well be an option worth considering, depending on your circumstances.

Protecting long-term financial stability

Protecting a pension is not about avoiding fair division but simply ensuring any division reflects its true long-term value.  

Practical steps include:

• Taking legal advice at an early stage
• Obtaining up-to-date CETV figures
• Considering whether actuarial evidence (a PODE report) is required
• Reviewing both your projected retirement incomes
• Ensuring any agreement is incorporated into a legally binding Financial Order
• Checking scheme-specific rules and implementation timelines  

Public service pensions may have been built over decades. Decisions made during divorce can impact someone’s financial security for many years to come, so it is important that the division is done carefully and with appropriate professional advice.

A balanced outcome

Financial settlement is not about penalising anyone or disregarding their contribution to public service. In reality, it is about a sustainable outcome that will meet the needs of both individuals in retirement.  

In summary, where public service pensions are involved, achieving a fair settlement requires:   

• Proper valuation
• Clear legal framework
• Awareness of rules and regulations 
• Careful drafting of orders
• Informed negotiation  

The Family Law team at K J Smith Solicitors has extensive experience advising Armed Forces personnel, NHS workers, teachers, police officers and fire service professionals in complex financial remedy proceedings. We understand the statutory framework, scheme-specific rules and procedural timing that can materially affect pension outcomes. Financial decisions made during divorce have consequences that last.  

At K J Smith, we have created an ecosystem of care around the divorce process. Alongside our specialist solicitors, we work closely with experienced mediators, actuaries, financial advisers and other professionals to ensure pension assets are properly valued and settlements structured with long-term stability in mind. Arrange a free 45-minute consultation with us to clarify how your or your partner’s pension is likely to be treated and what steps should be taken before any Final Order is made.

Our Marketing Executive Jess Bouwer will be at the Veterans Expo in Bristol on the 23rd of April 2026, should you wish to learn more about how we can help with your pension, making of a will or any estate management queries.