Case study
Why sharing all of a defined benefit pension can destroy value, and how knowing its true worth first avoids it.
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General information, not advice on your own case.
Illustrative example. This is not a real case. The figures are round numbers chosen to show how the arithmetic works.
One spouse had a defined benefit pension. Its true worth, a fair value, was about £600,000, though the transfer value the scheme quoted was only £320,000. Neither of them had much else, so they agreed to share the pension 100% to the spouse who had none of their own, and move it into a personal pension.
Share 100%, and she gets the whole pension. All of it, all £600,000 of value.
When a pension is shared, the scheme hands over its transfer value, not its true worth. So on a 100% share only the £320,000 transfer value actually crossed to her and into her personal pension, not the £600,000 the pension was really worth. The missing £280,000 did not go to him either. It was simply absorbed back into the scheme, lost to both of them, because a valuable guaranteed pension had been cashed out at the lower transfer figure.
£600,000 of pension. £320,000 shared across. £280,000 gone, to neither of them.
Sharing the whole pension on its transfer value destroyed nearly £280,000 of value the couple could have kept between them. Sharing less of the pension and balancing the rest with other assets, or keeping the share inside the scheme as a pension credit rather than cashing it out, would have preserved far more of it.
The more of a defined benefit pension you share, and the more of it you move out to a personal pension, the more of its true value you lose, because the scheme only ever pays out the transfer value. Knowing the real worth first lets you share only as much as you need to, and keep the rest, rather than pouring value away. This is not "clawback", which is a separate issue covered on its own page.
Read the main pension sharing guide, or start with the "Do I need a PODE?" tool.
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