How is a Pension Sharing Order calculated

Your pension is probably one of your biggest assets after the house. When you’re divorcing, working out how to divide it fairly isn’t as straightforward as splitting the current value in half.

Pension sharing order calculation depends on the type of pension you have, how much was built up during the marriage, and what percentage the court decides is fair. For defined benefit pensions like the NHS or Teachers’ schemes, the process is more complex because you’re not just dividing a pot of money, you’re splitting a guaranteed stream of income. 

Getting the valuation through will typically take between 4-12 weeks, and the calculation happens during that process. Therefore, starting the process early means it shouldn’t delay your divorce. However, this requires the process to be followed to the letter and completed correctly first time around. 

Understanding how it works will help ensure you negotiate a fair settlement and avoid any potentially expensive mistakes.

Written by David Connor | Director, Head of Family | 30+ years experience | Legal 500 recommended lawyer.

What Actually Gets Calculated?

A Pension Sharing Order divides a pension by allocating one person (likely the spouse without the pension) a percentage of the value. This is known as a pension credit. 

The starting point for a Pension Sharing Order is in the Cash Equivalent Transfer Value (CETV). This is what the pension would be worth if it was transferred to another scheme today. Getting a CETV is the first tangible step in any pension division, and understanding how the pension valuation process works in divorce will aid you to see whether any potential settlement figure you’ve been offered is a fair one.

For Defined Contribution Pensions: The CETV for workplace pensions, personal pensions, SIPPs, etc. is straightforward. If your pension pot has £100,000 in it upon division, the CETV is £100,000. 

For Defined Benefit Pensions: For final salary schemes, or pensions for NHS employees/teachers/Police/ fire service/civil service workers, the CETV is more complex. This is because these pensions pay you a guaranteed income for life, meaning an actuary is required to accurately calculate what that amount is worth today if it were to be paid in a lump sum. 

The CETV calculation will consider:

• Your age.
• How long until you retire.
• What income the pension will pay.
• How long you’re likely to live.
• Interest rates and inflation assumptions.

This is why defined benefit CETVs often seem surprisingly large or small compared to what you might expect (depending on the above factors).

The Basic Calculation Method

Once you have the CETV, the court decides what percentage one person should get.

Example: If Sarah’s pension has a CETV of £200,000 and the court orders a 40% pension share. Sarah’s ex-partner gets £80,000 (40% of £200,000) while Sarah keeps the remaining £120,000.

The amount transferred is not always calculated on the exact day of the court order. The actual split is calculated on the “transfer day” — the day the pension provider implements the order. If the pension value has changed by that date, then the receiving party gets the agreed percentage of whatever the value is on that day.

Why the Calculation Takes Time

The delay isn’t usually in doing the maths. It’s in getting accurate information and making sure everyone agrees on the assumptions. The pension sharing order process (and what can hold it up) is as follows:

1. Requesting the CETV (usually 2-12 weeks)
   1. Simple defined contribution pensions: 2-4 weeks.
   2. Complex defined benefit pensions: 8-12 weeks.
   3. NHS and Teachers’ pensions: 10-12 weeks minimum.
2. Checking and Challenging the CETV (0-8 weeks)
   1. Specialist review for defined benefit pensions: 2-4 weeks.
   2. Costs £1,500-£3,000 but worth it for pensions over £100,000.
3. Negotiating the Percentage (2-12 weeks)
   1. By agreement: 2-4 weeks.
   2. Through court: 2-3 months. Although this can vary
4. Drafting and Approving the Order (2-6 weeks)
   1. Consent order: 2-4 weeks for court approval.
   2. Contested: 2-3 months or more.
5. Implementation (4-16 weeks)
   1. Most pension providers: 8-12 weeks.
   2. NHS and Teachers’ pensions/other defined benefit schemes:: 12-16 weeks.

Total timeline: 3-9 months from first requesting valuations to the pension being split (if the process is handled with efficiency and accuracy). 

The implementation stage — what happens after court approval, what it costs, and how to avoid delays — is covered in detail in our comprehensive guide to pension sharing order costs and timescales.

How the Percentage is Decided

There’s no automatic formula regarding how pension sharing order calculation percentage is conducted. The court aims for fairness, not mathematical precision.

The starting point for determining the percentage split is usually the “equal” division of assets built up during the marriage. However, “equal” doesn’t always mean a 50/50 split. 

Factors that affect the percentage include:

• Length of Marriage: Longer marriages usually mean more equal splits. Short marriages (under five years) might see smaller percentages, especially if the pension was mostly built up before marriage.
• Age Difference: If one spouse is significantly younger, they might get a smaller percentage because they have more time to build their own pension.
• Other Assets: If there’s a house, savings, or other assets involved, the pension might be offset against these rather than split directly.
• Needs: If one spouse has significantly lower earning capacity (perhaps they gave up their career for childcare), they might get a larger share.
• Contributions: Courts recognise non-financial contributions like childcare and homemaking as being equal to financial contributions.

Examples of Real Pension Calculations

Example 1: Standard case

• Marriage: 15 years
• Husband’s Pension CETV: £300,000 (wife has no other assets)
• Court orders: 50% pension share
• Result: Each person gets £150,000 pension value

Example 2: Offsetting

• Marriage: 20 years
• Husband’s pension CETV: £250,000
• Wife’s pension CETV: £50,000
• Court considers: £200,000 difference
• Court orders: 40% share of husband’s pension (£100,000) to equalise
• Result: Both end up with roughly £150,000 in pension value

Example 3: Needs-based

• Marriage: 25 years
• Husband’s NHS pension CETV: £500,000
• Wife has no pension (stayed home with children)
• House equity: £300,000
• Court orders: Wife gets house (£300,000), husband gets pension, no pension share
• Result: Assets roughly balanced without splitting pension (capital which can be accessed now, ie. the house valued more highly than future pension assets which can only be accessed in the future).

Example 4: Short marriage

• Marriage: 4 years
• Wife’s pension CETV: £180,000 (built up over 20-year career)
• Husband’s pension CETV: £30,000
• Court orders: 15% share of wife’s pension (£27,000)
• Result: Recognises short marriage while providing some fairness

Defined Benefit vs Defined Contribution: Why It Matters

The type of pension significantly affects how the calculation works and how complex it gets. Defined contribution pensions are considered simpler as the CETV equals the pot value — so if there’s £150,000 in the pension, this is what gets divided. 

Therefore, the pension sharing order calculation is: 

• Current pot value = CETV.
• Apply the percentage from the court order.
• Transfer that amount to the receiving spouse’s pension.

Defined benefit pensions are more complex. This is because the CETV is an actuarial calculation of what a guaranteed income stream should be worth today. 

Example: John has an NHS pension that will pay £15,000 per year from age 65. He is currently 50. An actuary calculates this is worth £280,000 as a CETV today.

But that £280,000 isn’t sitting in a pot anywhere. It’s a calculation based on assumptions about:

• How long John will live.
• Interest rates.
• Inflation.
• The cost of buying an equivalent guaranteed income.

The challenge: The CETV might not reflect the true value to John. If he’s in poor health, the pension might be worth less to him than the CETV suggests (because he won’t live as long to collect it). If he’s likely to live to 100, it might be worth more.

This is why defined benefit pensions often need specialist input to check the calculation is fair.

Career Average vs Final Salary

• Final Salary Pensions: Base your retirement income on your salary in your final years (or best years) of work. The CETV calculation projects what your final salary will be.
• Career Average Pensions: Base your income on your average salary throughout your career. The calculation is usually more straightforward because there’s less projection involved.

Most public sector schemes (NHS, Police, Teachers’, Civil Service, etc.) switched from final salary to career average for service after 2015, so many people have a mix of both. For more information about pension sharing in the public sector, view our dedicated guide. 

What Gets Included in the Calculation?

Not everything in the pension gets counted for the split.

Service During Marriage

Courts typically only divide the pension value that was built up during the marriage, though this isn’t a strict rule, as there is often the period of cohabitation prior to the marriage if “seamless” (no periods of separation). 

Example: Tom started his pension in 2005. He got married in 2010 and is divorcing in 2025.

• Total pension service: 20 years (2005-2025).
• Service during marriage: 15 years (2010-2025).
• Court might focus primarily on the value built up during those 15 years.

However, this can become complicated because pension value doesn’t grow linearly. The last 10 years of pension contributions are often worth more than the first 10 years due to compound growth and salary increases, and cohabitation prior to marriage may also change the calculation

For defined benefit pensions, there are different calculation methods:

• Immediate offset: Values only the pension built up during marriage.
• Deferred offset: Values the whole pension but adjusts for service before marriage.
• Revaluation: Projects what the pre-marital pension will be worth at retirement and deducts that.

What Doesn’t Count

• State Pension: Cannot be shared in divorce and are excluded from Pension Sharing Orders.
• Pension Payments Already Being Taken: If someone is already drawing their pension, it gets more complicated. Pension sharing is still possible, but the calculation is different and the fees are usually higher.
• Pension Protection Fund compensation: If the pension scheme has gone bust and is in the Pension Protection Fund, special rules apply.

When Values Can Change

The CETV isn’t fixed forever. It can even change between getting the valuation and implementing the order.

CETV Validity Period

Most CETVs are valid for 3-6 months. After that, you need a new valuation.

Defined contribution pensions: The value changes daily with stock market movements. If markets rise, the pension is worth more. If they fall, it’s worth less.

Defined benefit pensions: The value changes with interest rates and actuarial assumptions. When interest rates rise, CETVs often fall (because it’s cheaper to buy an equivalent income). When interest rates fall, CETVs rise.

This means you could get a CETV in January showing £200,000, then by June it’s worth £180,000 or £220,000.

What happens: If your divorce is taking longer than the CETV validity period, you need to request a new one. The percentage in the order stays the same, but it applies to the new value.

Transfer Day Calculation

The final amount is calculated on the “transfer day” — the day when the pension provider implements the order.

If the order says “40% pension share” and the CETV on transfer day is different from when you negotiated, the receiving person gets 40% of the transfer day value.

Example: The CETV was £150,000 when you agreed a 40% share (£60,000). By the time the provider implements it four months later, markets have risen and the CETV is £165,000. The receiving person now gets £66,000 (40% of £165,000).

This works both ways though. If values have fallen, they will get less.

Common Calculation Mistakes That Cost You

Mistake 1: Using an Old CETV

If your CETV is more than six months old, it’s likely out of date. Using stale valuations can lead to unfair settlements.

For defined benefit pensions, get a new CETV if:

• Interest rates have changed significantly.
• Your salary has increased substantially.
• You’ve had a promotion that affects your final salary pension.

Mistake 2: Not Checking the Actuary’s Assumptions

Defined benefit CETVs use assumptions about your life expectancy, retirement age, and other factors. Sometimes these are wrong.

If you have health issues that reduce your life expectancy, the CETV might overvalue the pension. If you plan to work beyond normal retirement age, it might undervalue it.

A PODE can challenge these assumptions and get a more accurate calculation.

Mistake 3: Forgetting About Tax

The pension transfer itself doesn’t create a tax charge, but future withdrawals will be taxed.

If you receive a pension credit and immediately withdraw it, you’ll pay income tax and possibly early withdrawal penalties if you’re under 55.

The calculation should consider the after-tax value if one person plans to access the money soon while the other won’t touch it until retirement.

Mistake 4: Treating All Pension Values as Equal

£100,000 in a defined contribution pension is not the same as £100,000 CETV from a defined benefit pension.

The defined benefit CETV represents a guaranteed income (often with inflation protection and a spouse’s pension). The defined contribution pot is subject to market risk and you have to manage it yourself.

A fair settlement might give the person receiving the defined benefit share a smaller percentage because the quality of that pension is better.

Mistake 5: Not Factoring in Implementation Fees

If implementation fees (typically £2,000-£3,500) are being deducted from the pension before the split, this reduces the amount available to divide.

Example: Pension value is £100,000. Implementation fee is £2,500, deducted before splitting. This leaves £97,500 to divide. A 50% share equates to £48,750, not £50,000.

Make sure the order specifies whether fees come out before or after the percentage is calculated, and who pays them.

Do You Need an Expert?

For simpler, smaller pensions (under £50,000, defined contribution), you probably don’t need a pension expert. Your solicitor can handle it.

However, you should consider a PODE if:

• The pension is worth over £100,000.
• It’s a defined benefit scheme (NHS, Teachers’, etc. final salary).
• You have multiple pensions to divide.
• There’s a significant age difference.
• One person has health issues affecting life expectancy.
• The CETV seems unusually high or low.
• You’re not sure if pension sharing or offsetting is better.

A PODE report often costs between £1,500-£3,000 but can save you tens of thousands in the settlement if the calculation is wrong or the wrong method is being used.

 

Quick Answers to Common Questions

• How long does a pension sharing calculation take? Getting the CETV takes 4-12 weeks depending on the pension type. Negotiating the percentage takes 2-12 weeks. The total process from requesting valuations to agreement is typically 2-4 months.
• Do you split the whole pension or just the part earned during marriage? Usually the focus is on value built during the marriage, but courts can divide the whole pension, or a different proportion,  if it’s fair. The calculation method depends on your specific case and often needs expert advice.
• What if my pension value changes before the order is implemented? The percentages specified in the order stays the same but applies to the value on “transfer day” when the provider implements the order. If markets rise, the receiving person gets more. If they fall, they get less.
• Can I challenge the CETV calculation? Yes, especially for defined benefit pensions. If you think the calculation is wrong, a pension on divorce expert can review it and challenge the assumptions. 
• Do I need an actuary for a simple workplace pension? Probably not if it’s a defined contribution pension under £50,000. For defined benefit pensions or larger pots, expert advice usually saves more than it costs.
• How is a career average pension calculated differently from final salary? Career average is usually simpler because it’s based on known past salaries. Final salary requires projecting future salary increases, which adds uncertainty. Both need actuarial calculations for the CETV.
• What happens to pensions built up before marriage? It depends on the calculation method used. The three main approaches are immediate offset (excludes pre-marital service), deferred offset (includes it but adjusts), or revaluation (projects pre-marital value at retirement). Your solicitor will recommend the fairest method.
• Can the percentage be changed after the order is approved? No, once the court approves the order, the percentage is fixed. Only the actual pound amount changes if the CETV changes before implementation.
• What if we both have pensions of similar value? You might not need any pension sharing. If you both have £80,000 pensions, if both are defined contribution schemes, it’s often simpler for each person to keep their own. However if one fund is a defined benefit and the other a defined contribution scheme, this may not be a fair outcome. Courts look at equalising overall assets, not every individual asset.
• How do they calculate a pension that’s already paying out? It’s more complex and uses different actuarial assumptions. The CETV calculation considers how much has already been paid and how much remains to be paid. Implementation fees are usually higher (often £3,000-£5,000).

How WHN Solicitors Can Help

Pension sharing order calculations are technical and easy to get wrong. The difference between a fair calculation and an unfair one can be tens of thousands of pounds, or more. Money which can significantly affect your lifestyle post-retirement. 

At WHN Solicitors, thanks to years of experience, and having handled  hundreds of pension divisions, we know which calculation methods will produce fair results and which ones will not for our clients — including potentially complex divisions like those involving NHS, teachers’, and civil service pensions. 

Getting the calculation right from the outset means you are able to negotiate from a position of knowledge and of strength. Therefore, we will review your CETV, advise you on the best next steps, and make sure that the calculation method used reflects the true value of the pension — not just what is shown on paper. 

Pension sharing order calculations don’t need to delay your divorce for months on end. With early advice, we can move efficiently through valuations and negotiations, while protecting what you’ve spent a career building. 

Contact David Conner at WHN Solicitors today to find out more about how we can help with pension sharing order calculations in your divorce: 

• Email: david.connor@whnsolicitors.co.uk
• Call: 01706 232039