The Society of Pension Professionals has called for extending pension sharing orders to cohabiting couples, in response to a government consultation that proposes giving couples who live together for three years similar financial rights and obligations as married couples and civil partners.

 

A consultation by the Ministry of Justice closes on Friday which proposes a new legal framework for cohabiting couples, to protect the financially weaker party. The SPP has responded highlighting the value of pensions and called for pension sharing orders to be made available to cohabiting couples. 

 

Under the government’s proposals, those who live together for at least three years or who share a child would automatically have similar financial rights and obligations as married couples and civil partners. They would both need to opt out if they preferred to keep their assets separate – an opt-out by just one party would not alter the automatic legal framework. 

 

The change would likely impact pensions, which in any case tend to be overlooked during relationship breakdowns. This often causes detriment to the financially weaker party, who may have taken career breaks for caregiving, said Oliver Topping, chair of the SPP’s legislation committee. 

 

The SPP wants both more rights for cohabiting couples and more focus on pensions. 

  

“Pension needs should be given equal prominence in family law and vital protections such as pension sharing should be extended to cohabiting couples,” he argued. 

  

“However, to make these reforms workable in practice, policymakers must provide clear, objective criteria for defining qualifying cohabitants and allow the pensions industry sufficient lead-in time to adapt.” 

 

The SPP said this legal definition is necessary “especially given the upcoming 2027 inheritance tax changes relating to unused pensions”.  

 

Under these changes, unused defined contribution pots are added to the estate for inheritance tax purposes. IHT is not paid by spouses or civil partners but does apply to unmarried couples. 

 

If cohabiting partners acquire the rights proposed by the MoJ, it would mean that they are entitled to inherit in the same way as a spouse or civil partner even where someone dies without a will but would remain liable for any potential IHT. The MoJ did not discuss extending the IHT tax break to cohabiting couples, saying these issues “sit with other government departments”. 

 

As well as giving cohabiting couples access to pension sharing and greater prominence to pensions in divorce, the SPP wants pensions dashboard records to become a standard part of court disclosure, saying this would ensure full transparency and speed up the process. 

 

Baroness Deech calls for opt-in system 

 

The government’s proposed new approach to cohabitation is being criticised by Baroness Ruth Lynn Deech. The crossbencher said any new protections for couples living together should operate on an opt-in basis. 

 

A poll of 2,060 adults by Survation suggests nearly three-quarters (72%) have heard little or nothing about the legal changes, and only 37% supported them when they were explained. There is also no clear split on whether reform is needed, with 42% saying they are happy with the status quo and 41% in favour of reform. 

“The polling shows the government has no clear public mandate for automatically imposing marriage-like legal rights and obligations on cohabiting couples without their consent,” Baroness Deech said.

She warned that people might not even realise that marriage-like financial obligations apply to them when they live together more than three years. In addition, she noted that many people consciously choose not to remarry, for example to protect assets for children from previous relationships. 

The former law lecturer suggested the proposed approach is a departure from established principles.  

"Ultimately, the issue is not whether the law should provide additional remedies. It is whether significant legal rights should arise because adults choose them, or because the state presumes they intended them,” she said. 

 

In pensions, the division of assets has long been a topic of debate. In England – unlike in Scotland - there is currently no ground rule on how divorcing couples should split their assets, something that was highlighted and criticised in a Law Commission report in late 2024. There is also no requirement to include pensions in any discussions or agreement on separation or divorce. However, for married couples and civil partners who are aware, pension sharing orders or, more rarely, pension attachment orders can be made. The latter means the ‘attached’ person only receives payments from the pension once the scheme member retires, and payments stop when either person dies, potentially leaving the weaker party without any income. Pension sharing orders can mean that a family home needs to be sold sooner than anticipated to allow assets to be shared.