What happens to an Armed Forces pension on divorce?

Divorce is never easy, and when one party is a serving or former member of the Armed Forces, the financial implications — particularly around pensions — can be complex. Military pensions are often among the most valuable assets in a marriage, and understanding how they are treated during divorce is essential for both parties.

Are Armed Forces pensions considered matrimonial assets?

Pensions are considered matrimonial property and can be divided during divorce. This includes Armed Forces Pension Scheme (AFPS) benefits, regardless of whether they were accrued before or during the marriage. The division depends on several factors, including:

• Length of the marriage
• Timing of pension accrual
• Other financial resources
• Needs of both parties and any children

The court has discretion to decide how pensions are treated, but the most common outcome is a Pension Sharing Order (PSO) if pensions are being shared, which provides a clean financial break.

What is a Pension Sharing Order?

This is the most common and preferred method. It gives the ex-spouse a share of the pension, which becomes their own pension entitlement. They become a Pension Credit Member of the scheme but cannot contribute further or transfer it elsewhere. The PSO is not affected by remarriage or death of the original member, which provides certainty for the ex-spouse.

How different Armed Forces pension schemes are treated

The Armed Forces Pension Scheme has evolved over time, and different rules apply depending on which scheme the member belongs to:

AFPS 75

Immediate pension payable after qualifying service (e.g. 16 years for officers). The scheme includes a lump sum (typically 3x annual pension) on retirement, as well an index linked income for life. For the service member, they will receive their lump sum and income when they retire. PSOs under this scheme are payable from age 65 for the ex-spouse, which includes the lump sum. Provided the serving spouse has not left the services and received their lump sum before the implementation of a pension sharing order, the ex-spouse will also receive a lump sum at retirement age as well as their income. If the service member has already received their lump sum and the pension is in payment, the ex-spouse will not receive a lump sum.

AFPS 05

The pension is payable from age 55 (with reductions if taken early). The AFPS 05 scheme introduced Early Departure Payments (EDPs), but these are not shareable. However, they are an income source payable under a pension scheme so they are taken into account by the court when considering pensions on divorce. As EDP is only paid until the service member receives their pension, it is important to take legal advice where EDP is likely to be payable to the service member as this could have an impact on the percentage of any pension sharing order made. PSOs also typically payable from age 65.

AFPS 15

This is the current Career Average Revalued Earnings (CARE) scheme. There is no automatic lump sum; one can be generated by commuting part of the pension. PSOs are payable from State Pension Age (currently 67), though early access from age 55 is possible at a reduced rate.

Key considerations when dividing an Armed Forces pension

A Cash Equivalent Transfer Value (CETV) is needed to assess the pension’s worth. This can be obtained from Veterans UK for a fee, and it is important that one is obtained as soon as possible. They remain valid for one year so it would be sensible to obtain it early.

When looking at dividing pensions, a common concern is the treatment of pensions accrued prior to the parties’ marriage. Many members of the armed forces started accruing their pension long before their marriage and understandably want to ring-fence that element of the pension from being shared. The starting point on divorce is to divide the assets 50/50, and that is based on all the pensions being included. In long marriages this is usually the outcome, even with pre-marital pensions, it can be challenging to suggest that there should be a departure from equality where the parties have been together for a long time.

In some cases, the timing of the pension accrual can be relevant. If the pension was accrued entirely outside the marriage, for example if someone had completed their military service before marriage then there are reasons to argue that those pensions should be excluded. Again, this can be challenging in low-value cases, but it is a possibility where there is clear evidence that a pension is “non-matrimonial” because it was built up pre-marriage. Recent case law has made it clear that in higher value cases, which is an easy threshold to meet with armed forces pensions due to their significant value, it is an acceptable outcome for pre-marital pensions to be excluded on the basis that they are non-matrimonial.

It is necessary to consider the parties’ other assets aside form pensions. Many people wish to retain their pensions and are prepared to give up their share of other assets, usually the house, in exchange for leaving their pension intact. This is known as offsetting. In order to offset an armed forces pension, the input of a pension expert is required as it is not as straightforward as comparing a pound in your pension to a pound in cash, especially with public sector pensions where the CETV is not a fair representation of the value. A solicitor can help you with this and explain the different means of offsetting a pension.

The court’s overriding objective is to ensure that both parties’ needs are met, and this includes income needs in retirement. As such, it is often necessary to share pensions to provide both parties with an income, especially where one party may have sacrificed their career to bring up children, and in turn lost out on building their own pension.

Should you seek legal advice?

It is always sensible to speak to a solicitor if you have an armed forces pension and are getting divorced, so that you know your options at an early stage and can discuss steps you can take to try and reduce any loss to the pension.