The Pitfalls of Offsetting Pensions in Divorce

The Pitfalls of Offsetting Pensions in Divorce 

 Navigating a divorce can be emotionally charged, and dividing assets adds another layer of complexity. When it comes to both your retirement nest eggs, two main options emerge: pension sharing and offsetting.  

 What is Pension Offsetting? 

Instead of sharing pensions by a pension share to provide equality of pension income on retirement, pension claims are dismissed.  

The value of the pension share is evaluated, and the capital value of the lost pension claims is reported, usually by an actuary or Pension Expert on Divorce. This offset value is attributed to the spouse not making pension claims. This could involve keeping a higher percentage of the equity in the family home, receiving more savings or investments, or a combination of both. 

Pension Offsetting Pitfalls: 

  • Trading future security for present needs 
  • Valuing pensions: Accurately valuing pensions can be complex, especially for defined benefit schemes. Cash Equivalent Transfer Values (CETVs) may not fully capture future income potential, or pension lump sums, particularly for public sector or final salary schemes. Offsetting can lead to the non-pension receiving spouse getting the short end of the stick. An offset must take into account and offset all values and benefits of the pensions. Mistakes or a lack of offsetting without a full actuarial report can lead to unfair outcomes. 
  • Long-term risks: Inflation and unforeseen circumstances can erode the value of non-pension assets over time, putting the receiving spouse at a disadvantage later. 
  •  Long-Term Financial Disparity: While the immediate access to assets that offsetting brings is appealing, it might not compensate for the lost future income from the pension. This can become especially acute during retirement when living expenses may rise and the non-pension spouse faces financial insecurity on retirement. 
  • Gender Imbalance: women often have smaller pensions due to career gaps for childcare or lower earning careers. Offsetting can exacerbate this disparity, leaving the disparity in retirement even greater.   
  • Overestimating Non-Pension Assets: the value of non-pension assets like houses can fluctuate over time due to market changes or unforeseen circumstances. This could leave the non-pension receiving spouse with less than anticipated in the long run. 
  • Loss of Benefits: some pensions have benefits including life insurance or survivor benefits. Offsetting the pension might mean forfeiting these valuable protections, leaving the non-pension spouse vulnerable in case of their ex-spouse’s death. 
  • Emotional and Psychological Impact: the feeling of giving up a valuable asset like a pension for immediate needs can be emotionally taxing and lead to resentment in the long run. It’s crucial to weigh the emotional consequences alongside the financial implications. 

The choice between offsetting and sharing depends on individual circumstances, risk tolerance, and future needs. Factors like age, income disparity, asset types, and retirement goals should all be considered. Seeking professional legal and financial advice is crucial to understand the implications of each option and arrive at a fair and informed decision. 


  • Offsetting offers immediate benefits and a clean break but can lead to unequal future income. 
  • Pension sharing can ensures equal retirement income 
  • Individual circumstances and professional guidance are key to making the right choice 
  • Don’t ignore your future financial needs too and your vulnerability on retirement 

Remember, pension offsetting is an option that should be considered with full professional guidance from lawyers and financial advisors who can assess the specific circumstances of your case and the potential pitfalls. Weighing the long-term consequences alongside the immediate benefits is essential to making an informed choice that secures your financial future. 

Divorce can be challenging, but understanding your full options for dividing assets like pensions can empower you to navigate the process with clarity and confidence.  

Contact Just Family Law for a full assessment of your pension position on your divorce and to support you to achieve a fair and secure future 01962 217640 

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.