Pensions and divorce/dissolution of a civil partnership
Divorce proceeding
If you get divorced, or dissolve a civil partnership, the court will take your pension assets into account when they decide a financial settlement.
You and your ex-spouse or ex-partner will each need to tell the court about the value of your pension benefits including the cash equivalent value (CEV). The CEV is the ‘capitalised’ value of your pension benefits, and a convenient way to assess their value in relation to your other assets.
How do I get the information I need?
Either download and fill in our divorce request form or ask your solicitor to request this information on your behalf. Please do this as soon as possible because we need several weeks to prepare a CEV valuation.
We provide one free CEV valuation a year. But we will usually charge you if you request more than one or ask for additional information. Our charges can be found by clicking here
We’ll acknowledge in writing all correspondence we receive from you in connection with divorce or dissolution proceedings. Please contact us if you don’t get this.
Pension sharing options
The following are some of the ways your pension benefits can be shared.
Pension offsetting
You can offset the value of your pension benefits against the value of other financial assets in the divorce settlement. For example, you could keep your pension, and your ex-spouse or ex-partner could receive alternative assets of a comparable value (this doesn't apply if you are in receipt of a dependents pension).
Pension sharing
The court might issue a pension sharing order that transfers part or even all your pension benefits to your ex-spouse or ex-partner.
your ex-spouse or ex-partner will hold in their own right any benefits transferred under the order, even if you or your ex-spouse or ex-partner’s circumstances change in the future (if they remarry for example). The amount and payment date of transferred benefits isn’t linked to your benefits.
Earmarking order
Earmarking
Earmarking is a term used to describe special attachment orders made by the court. When the court makes an attachment, or earmarking order, the pension remains with the member, but a payment is made to the ex-spouse when the members benefits become payable. Earmarking can also be used in cases of judicial separation.
The court can order that the ex-spouse receives one of the following benefits or a combination of:
- All, or part, of the LGPS pension (this does not apply in Scotland).
- All, or part, of the LGPS lump-sum retirement grant.
- All, or part, of any lump sum paid on death.
An order can also require a member to exchange some of the pension for an additional lump sum retirement grant (this does not apply in Scotland).
If the court makes an earmarking order, your pension benefits still belong to you, but some are ‘earmarked’ for your ex-spouse. Earmarked benefits will be paid to your ex-spouse when your benefits are paid to you, reducing the amount you get.
Note that due to the following limitations of earmarking orders they are not widely used.
- Because the pension rights remain with you, your ex-spouse or ex-partner must wait for you to retire or die to get earmarked benefits.
- If your ex-spouse or ex-partner remarries or enters into a new civil partnership, an earmarking order against pension payments (but not lump sums unless the order directs otherwise) would cease and the full pension would be restored to you.
- Pension payments to your ex-spouse or ex-partner would cease on your death, although any earmarked lump sum death grant would then become payable to your ex-spouse or ex-partner.
- A transfer of pension benefits to another scheme will result in the earmarking order also transferring.
How will a pension sharing order affect my pension benefits?
It depends on whether you have already retired.
A pension sharing order issued before you retire
Pension benefits you’ve built-up to the date the order is applied are reduced by the percentage the court allocates to your ex-spouse or ex-partner.
The reduction is known as a pension debit and is increased in line with the rise in the cost of living between the date it was first calculated and the date your benefits are paid. When your benefits are paid, the re-valued amount of the pension debit is deducted from your retirement benefits, and adjusted if your benefits are paid before or after your normal pension age.
A pension sharing order issued after you retire
Your current pension will be reduced by the percentage the court allocates to your ex-spouse or ex-partner from the date of the pension sharing order.
Please make sure we receive the order as soon as possible so we can take it into account when we adjust your pension. Otherwise you will most likely be overpaid and we will need to recover the overpayment from you.
How will a pension sharing order affect death benefits?
Your ex-spouse or ex-partner will no longer be entitled to a survivor’s pension from you.
If you nominated your ex-spouse or ex-partner to receive some or all of your lump-sum death grant, we assume you want us to disregard it after your divorce or dissolution. You can make a new nomination by downloading a ‘death grant expression of wish’ form by clicking here. – or ask us to send you one.
If you subsequently remarry or form a new civil partnership a pension share will reduce the benefits due to your new spouse. However, if you have dependent children, any child’s pension payable won’t be reduced. Any dependant children’s pension will remain linked to your pension and the value of the benefits payable will be worked out as if the pension share hadn’t taken place.
Buying additional pension benefits
If your pension benefits have not yet been brought into payment, you may be able top up your benefits by buying extra scheme pension, through Additional Pension Contributions (APCs) and/ or paying Additional Voluntary Contributions (AVCs). You can find more information on this by clicking here
There are other options available such as paying into an individual pension plan through another pension provider but you should take independent financial advice about this and any other options that may be available to you.
Can I transfer my pension benefits to another pension scheme?
You can transfer your remaining benefits to another pension arrangement if you leave the pension scheme, as long as you haven’t yet been paid them. There are time limits for doing this – see by clicking here or call us for more information.
If you transfer your benefits to another LGPS pension fund, we will transfer your full benefits and the other pension fund will be responsible for deducting the pension debit from your benefits at retirement.
If you transfer your pension benefits to any other type of pension scheme or arrangement, we will only pay a transfer value for your pension benefits less the value of the pension debit.
How does a pension sharing order affect the annual and lifetime allowances?
When you draw your benefits, it’s the reduced value of your benefits after the pension debit has been deducted that’s used to assess the value of your benefits against the value of all the pension savings you’re allowed before you pay the lifetime allowance tax charge. The lifetime allowance for 2019/2020 is £1,055,000 million. Most scheme members' pension savings will be significantly less than the lifetime allowance, but if you’re a high earner affected by the introduction of the lifetime allowance from 6 April 2006, a pension debit may affect lifetime allowance protection if you have it.
Pension credit
As a result of a pension sharing order your ex-spouse will be awarded a pension in their own right. This is called a pension credit. Click here to find out more about this.
Charges
Click here for details of when and what we charge.
Divorce guide
Information about pensions and divorce or dissolution of a civil partnership can be found in our divorce guide.
Please note that the information we provide for divorce is only a general guide. You should take legal and financial advice about getting divorced and how this affects your pension benefits.
