Divorce is difficult enough emotionally without also having to untangle years of shared finances, and it’s completely normal to want to look away from the financial side while everything else feels overwhelming. But the numbers involved can be significant: research from Legal & General (April 2025) found that women’s household income roughly halves in the year following divorce, while men’s falls by around 30% over the same period. Facing your finances early, rather than putting them off, tends to be what gives people back a sense of control.
If you’re recently divorced, or in the middle of a settlement, here’s where a financial plan tends to help most.
Working out what matters to you now
A divorce often means goals you’d built around a shared life no longer apply, and it can feel like starting from scratch – liberating for some, unsettling for others. A financial plan starts by helping you work out what you actually want from here, rather than assuming your old priorities still hold.
It’s also common to be juggling several things at once: finding somewhere to live in the short term, working toward buying a property of your own in the medium term, and still wanting your mortgage paid off before you retire. Balancing goals on different timescales is hard at the best of times, and harder still during a period of genuine upheaval – which is exactly where having a plan that weighs them against each other helps.
Taking emotion out of financial decisions
Strong emotions are entirely normal during a divorce, but they’re not a great basis for financial decisions made under pressure. Having a financial planner to talk things through with tends to bring a bit of perspective – someone removed from the emotional weight of the situation who can help you see your options clearly, so decisions are made deliberately rather than reactively.
Understanding how pensions are dealt with in a settlement
Pensions are often the second-largest matrimonial asset after the family home, and it’s easy to underweight them in a settlement simply because they don’t feel like “real” money in the way a bank balance or a house does.
In England and Wales, they’re generally dealt with in one of three ways: a Pension Sharing Order, which splits a pension into two separate pots at the point of divorce so each of you has your own fund going forward; a Pension Attachment Order (sometimes called earmarking), where one spouse receives a share of the other’s pension income or lump sum when it’s eventually drawn, keeping a financial link between you after the divorce; or offsetting, where one spouse keeps their pension in full and the other receives a larger share of other assets, such as the family home, in exchange.
Which approach makes sense depends heavily on your circumstances, and valuing a pension fairly alongside other assets isn’t always straightforward – this is one area where working with a financial planner alongside your solicitor tends to be genuinely worthwhile, rather than leaving pensions as an afterthought in negotiations.
Not all pensions are treated the same: defined benefit versus defined contribution
One thing worth flagging to your solicitor early on is whether any pensions involved are defined benefit or defined contribution, since the two are valued very differently and headline figures can be genuinely misleading if compared directly. A defined contribution pension is essentially a pot of money – whatever’s been paid in, plus or minus investment growth – so its value for divorce purposes is straightforward: it’s simply the current fund value, and splitting it is usually a matter of dividing that figure by an agreed percentage. A defined benefit pension, by contrast, isn’t a pot at all – it’s a promise of a guaranteed income for life, based on your salary and length of service, with the employer or scheme bearing the investment risk rather than you. To value it for a settlement, it’s converted into a Cash Equivalent Transfer Value (CETV): essentially, an actuarial estimate of what it would cost to buy an equivalent guaranteed income elsewhere.
The trouble is that a CETV doesn’t always reflect what a defined benefit pension is genuinely worth. It can understate the value of guarantees a defined contribution pot simply doesn’t have – no investment risk, often inflation-linked increases, and frequently a spouse’s pension built in – meaning a £150,000 defined benefit CETV and a £150,000 defined contribution pot aren’t necessarily equivalent in real terms, even though they look identical on paper.
Public sector schemes add a further wrinkle: the NHS, teachers’, police and Armed Forces pensions, among others, calculate CETVs using Government Actuary’s Department factors that have historically produced figures some solicitors considered undervalued relative to the benefits actually promised, though a 2023 government review has since pushed valuations the other way for some schemes. In short, it isn’t safe to assume the mismatch runs in any particular direction without checking.
In practice, this means it’s worth telling your solicitor plainly which of your pensions (or your ex-spouse’s) are defined benefit rather than defined contribution, particularly if any involve a public sector or final salary scheme, since these often warrant a report from a specialist pensions actuary – sometimes called a Pension on Divorce Expert, or PODE – before a fair pension sharing order or offsetting arrangement can be agreed.
Bringing a financial planner into the conversation alongside your solicitor at this stage, rather than after headline CETV figures have already been used to agree a settlement, is usually the point at which it makes the most difference.
Getting to grips with your new financial circumstances
If your finances were previously combined with your ex-spouse’s, your household income and outgoings are probably quite different now. It’s worth reviewing your budget from scratch rather than adjusting your old one, particularly if you’ve taken on new costs – child maintenance, or maintaining a larger home to share custody, for example.
Divorce later in life can be particularly disruptive to retirement plans, since there’s less time left to rebuild before you’d hoped to stop working. Legal & General’s research (January 2026) found that 24% of people who divorce after 50 struggle to rebuild their savings, 13% believe they’ll never fully recover financially, and around 15% – more than 200,000 people – expect to delay their retirement as a direct result, with the average later-life divorcee seeing their income fall by roughly £7,750 in the year after the split. None of that is meant to be alarming for its own sake – it’s simply why getting a clear picture of where you stand now, rather than assuming things will sort themselves out, matters more the closer you are to retirement.
A plan that keeps up with your life
As financial planners based in Poole, we help people across Bournemouth and the wider Dorset area rebuild their financial plan after a divorce, and keep it under review as things settle and change – your plan today won’t be the same as your plan in a year or two, and that’s exactly as it should be. If you’d like to talk through where you stand, we’re always happy to have a no-obligation conversation.
Get in touch if you’d like help reviewing your financial plan following a divorce.
This article is for general information only and does not constitute advice. The information is aimed at individuals only. All information is correct at the time of writing (September 2026) and is subject to change in the future.
Pension sharing, attachment and offsetting are legal matters determined by the family courts as part of divorce proceedings, and should be discussed with a family law solicitor alongside any financial advice.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.