Dividing investments, pensions & savings during divorce: What you need to know

Dividing finances on divorce can be one of the most challenging aspects of the process, particularly where investments and savings form a significant part of the overall asset base. Pensions can be particularly emotive due to the link with working life and effort attributed to this. 

In England and Wales, there is no fixed formula for how assets should be divided. Instead, the court’s objective is to achieve a fair outcome based on the specific circumstances of each case. This means that understanding how investments, pensions and savings are identified, valued and ultimately divided is crucial to reaching a financial settlement that properly reflects both parties’ needs and contributions. 

A key factor in any financial remedy process is transparency when it comes to disclosing and sharing information as to the matrimonial assets. Without this, it is not possible to ensure a fair division of assets as the ‘pot’ cannot be identified. This includes disclosing all savings, pensions and investments worldwide, whether held individually or jointly. Where there are concerns that assets may not have been disclosed, the court has robust powers to investigate, as explored in the financial disclosure paragraph below. 

What counts as investments and savings in divorce?

This category of assets covers a wide range of financial products. These are often more liquid than pensions, but they can vary significantly in complexity and risk. 

Common examples include: 

• Cash savings held in bank or building society accounts

• Individual savings accounts, including cash ISAs and stocks and shares ISAs

• Stocks, shares and managed investment portfolios

• Bonds and structured financial products

• Cryptocurrency and other alternative investments

Even where assets are held in one party’s sole name or overseas, they are not automatically excluded from consideration. The court will assess the overall financial position and determine whether those assets should form part of the matrimonial pot. 

A distinction can in some circumstances be drawn between matrimonial and non-matrimonial assets: 

• Matrimonial assets are generally those built up during the marriage and are usually available for division

• Non-matrimonial assets may include wealth acquired before the relationship or received through inheritance. This can include pre-marital pension contributions, for example.

This distinction is not absolute. Non-matrimonial assets may still be taken into account or ‘invaded’, particularly where they have been mixed with joint finances or where they are needed to meet one party’s financial needs. However, it is possible to offset assets where more tax or administratively efficient. This may mean that the savings or pensions stay in your name but you might receive less of another asset ie. proceeds of a house sale. 

The legal framework: how courts approach division

The division of investments, pensions and savings on divorce is governed by Section 25 of the Matrimonial Causes Act 1973. This sets out the factors the court must consider when determining a fair financial settlement. 

The court has wide discretion, but key considerations include: 

• The income, earning capacity, property and other financial resources of each party

• Their financial needs, obligations and responsibilities

• The standard of living enjoyed during the marriage

• The age of each party and the duration of the marriage

• Contributions made by each party, including non-financial contributions such as caring for children

• The welfare of any children of the family, which is the court’s first consideration

Although there is often a starting point of equal sharing, particularly in longer marriages, this is not a fixed rule. The court’s objective is fairness. This can result in an unequal division where justified by factors such as differing financial needs or the origin of certain assets. This flexible approach is particularly important when dealing with investments and savings, as their liquidity and tax treatment can influence how they are distributed. 

The importance of full financial disclosure

Each party must provide a complete and accurate account of their financial position, including all savings, pensions and investments, regardless of whether they are held jointly or individually and whether onshore or offshore. 

This duty is ongoing and applies throughout the proceedings, which means the position must be updated. It ensures that both parties and the court have a clear understanding of the total asset pool before any decisions are made about division. 

A failure to disclose assets, whether deliberate or accidental, can have serious consequences. The court may: 

• Draw adverse inferences about the extent of undisclosed wealth

• Impose costs penalties

• Set aside a financial order if non-disclosure is later discovered

In more complex cases, particularly where significant investments are involved, specialist tools such as forensic accounting may be used to trace assets and identify discrepancies in financial disclosure. 

For a more detailed examination of how the courts deal with undisclosed assets, including the steps that can be taken to uncover hidden investments, see learn more here: Hidden assets in divorce: how to trace and the Court’s approach to undisclosed wealth in the UK. 

How investments and savings can be divided

There are several ways in which investments, pensions and savings may be divided during divorce. The most appropriate method will depend on the type of assets involved and the wider financial circumstances. 

Offsetting

Offsetting involves one party retaining investments or savings, while the other receives assets of equivalent value, often from other asset classes such as property or pensions. This can help achieve a clean break between the parties. It can also avoid or relieve administrative or tax burdens. 

Liquidation

Investments may be sold and the proceeds divided or transferred between parties. This approach is often straightforward but may involve transaction costs and tax consequences.

Transfer of Assets

In some cases, investments can be transferred from one party to the other. This allows the investment to remain intact but may require coordination with financial institutions. 

 Each approach should be carefully assessed with your solicitor and in light of long-term financial planning (which may require input from a financial adviser). 

Tax considerations when dividing investments

Tax is an important factor when dividing investments and savings. Failing to consider tax implications can significantly affect the overall value of a settlement. 

Capital Gains Tax is particularly relevant where investments are sold or transferred. The timing of any transfer between spouses can affect whether tax is payable. Different rules may apply depending on whether the transfer takes place during the tax year of separation or afterwards. 

There may also be reliefs and exemptions available, but these depend on individual circumstances and the nature of the assets involved. 

Given the potential complexity, it is often advisable to seek both legal and financial advice to ensure that tax consequences are fully understood and managed effectively. 

Joint vs individual accounts: how they are treated

Joint and individual accounts are both considered as part of the overall financial picture. 

Joint accounts are typically divided or closed as part of the financial settlement. In some cases, practical steps may need to be taken early in the process to prevent one party from withdrawing funds without agreement.

Individual accounts, although held in one party’s name, are not automatically excluded. If they were built up during the marriage or are needed to meet financial needs, they may be included in the matrimonial pot. 

Managing these accounts during proceedings requires careful handling to ensure that assets are preserved and properly accounted for. 

Conclusion

Dividing investments, pensions and savings during divorce requires careful consideration of legal, financial and practical factors. From identifying and valuing assets to understanding tax implications and choosing the appropriate method of division, each step plays an important role in achieving a fair outcome. 

Seeking early legal advice can help ensure that investments and savings are dealt with properly and that any settlement reached reflects both parties’ needs and long-term financial security.