Pension offsetting

Pension offsetting is one of the options available when divorcing or dissolving a civil partnership. It provides a clean break between all parties, as the value of any pensions is offset against other assets of the same or similar value.

How does it work?

When divorcing or dissolving your civil partnership, all your assets and those of your ex-partner are taken into account.

If you decide to opt for pension offsetting, each party keeps their pension assets. But these are then offset against the other assets – for example, if one person has a large pension pot, the other might get the house (assuming it has a similar value).

Pros and Cons

Pros
  • It keeps things simple.

  • One party might need to use other assets (for example, a home). It can be hard to value some assets as their values might change at different rates.

  • If the pension is small, making a pension sharing order could be expensive and might not be cost-effective. It can be difficult in some situations to divide assets fairly using pension offsetting, especially as the value of a person’s pension schemes might, in the long run, be their most valuable asset.

  • Offsetting orders aren’t affected by remarriage or death.

  • This might be a good option if there are overseas pension assets that need to be split, as these cannot be shared via a UK court order.

Cons
  • One person might be left with little or no provision for retirement. 

  • It can be hard to value some assets as their values might change at different rates.

  • It can be difficult in some situations to divide assets fairly using pension offsetting, especially as the value of a person’s pension schemes might, in the long run, be their most valuable asset.

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Whatever your circumstances or plans, move forward with MoneyHelper.

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