Pension Sharing Order: Can I Take a Lump Sum?
April 2025
When going through a divorce, many people wonder whether they can receive a lump sum from their spouse’s pension as part of the financial settlement. Pension Sharing Orders allow for the fair division of pension benefits, but they are governed by specific rules. If you're seeking a clean break or need access to funds quickly, it's important to understand how a pension share works and whether a lump sum payment is an option.
This summary provides general information and does not constitute legal advice on any individual circumstances.
A Pension Sharing Order is a court order that allows a portion of one spouse’s pension to be transferred to the other as part of a divorce settlement. The recipient receives a percentage of the pension fund, which is either moved into a separate pension pot in their name or added to their existing scheme, depending on the provider’s rules. The court decides the percentage based on factors such as the length of the marriage and the financial needs of both parties.
This approach provides a clean break, ensuring each individual has their own independent pension provision moving forward. It is particularly useful where one spouse has built up a larger pension, or the other has contributed less due to childcare or supporting the family.
Can You Take a Lump Sum from a Pension Share?
In most cases, you cannot take a lump sum directly from a pension as soon as a Pension Sharing Order is implemented. Once you receive your share of the pension, it becomes part of your own pension fund, and the usual pension rules apply. This means that you can only access the funds once you reach the minimum pension age (this is currently 55, rising to 57 in 2028).
At that point, under standard pension rules, you may be able to take up to 25% of the pension pot as a tax-free lump sum. The remainder must be used to provide you with an income during retirement, either through drawdown or the purchase of an annuity.
It's important to note that the timing and rules for taking a lump sum can vary depending on the type of pension scheme and your age at the time the Pension Sharing Order takes effect.
Can a Lump Sum Be Ordered Instead of a Pension Share?
If one party does not wish to divide pensions through a Pension Sharing Order, it may be possible to offset the value of the pension against other assets. This is known as pension offsetting. For example, one party might keep their entire pension in exchange for the other receiving a larger share of property or savings. In this case, the person receiving the offset may get a lump sum as part of the settlement, but this would come from other assets, not directly from the pension.
Offsetting can be complicated and may not always result in a fair outcome, particularly where the value of pensions is high. Legal and financial advice is essential to ensure the final agreement is balanced and suitable for both parties.
How Can Fullers Help?
At Fullers Family Law, we understand that finding a solicitor that you feel understands your own specific situation can be a daunting task. So, you can book a free call back with us here.
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For an initial discussion and a no-obligation quote, get in touch with us today by simply calling us on 01234 343134, filling in the contact form below, or emailing us at enquiries@fullersfamilylaw.com and a member of our team will get back to you.
