Divorce and my pension
Find out everything you need to know about divorce and your Scheme pension, including how it can be shared out and what information the Court may need.
The end of a marriage or civil partnership can be a very difficult and challenging time. And while the impact on your pension might not be the first thing to think about, it may help to know what to expect as you’ll need to make certain decisions about your finances.
Select the specific topics below to learn more about divorce and your Scheme pension.
1. Pension Offsetting
With Pension Offsetting, you keep your pension assets to yourself in their entirety while something else of the same or similar value, such as property, is awarded to your ex-spouse. If your situation changes in the future and you re-marry or die, your offsetting agreement won’t be affected.
Pension Offsetting might be a particularly good option if you or your ex-spouse have similar pension provision in place, or overseas pensions that need to be split. This is because international pension assets cannot be shared via a UK court order.
2. Pension Attachment Order (Earmarking Order)
With this option, when you start getting your pension, a certain amount that is agreed by both parties and approved by the Court, will go to your ex-spouse or former civil partner. The amount could also include a portion of your lump-sum death benefit and/or your retirement lump sum. The payments will be made directly to your ex-spouse or former civil partner when you decide to take your benefits. The State Pension is not included in it, though.
If you die before you start receiving your pension, your ex-spouse or former civil partner will not get the share awarded to them. They may however, still receive some of the lump sum which could be paid out when you die.
If your ex-spouse or former civil partner remarries, has a new civil partnership or dies before you, they will no longer be eligible to receive any of your pension payments, awarded to them and it will be re-instated to you. However, they may still be entitled to retirement lump sum.
3. Pension Sharing Order (PSO)
Pension Sharing provides for a clean break between both parties at the time of divorce or ending of a civil partnership. This is because assets are split immediately and it’s up to both parties to decide what to do with their shares independently.
With this option, a one-off payment that is agreed by both parties and approved by the Court, is made from your pension to your ex-spouse or former civil partner at the time of divorce or ending of a civil partnership. Their share is taken off the total
amount of your pension – this is known as a ‘pension debit’. Your ex-spouse receives their share, known as the ‘pension credit’ as soon as the order is finalised. Once the payment has been made, your ex-spouse will have
no further claim to your pension.
The amount they receive from you may be used to buy pension benefits either in the Railways Pension Scheme (RPS) or with another pension provider. These pension benefits are completely separate to yours, so your ex-spouse does not have to receive their
benefits at the same time you do. They could also continue to be paid after your death or if your ex-spouse or former civil partner remarries or enters a new civil partnership.
In this arrangement, if your ex-spouse or former civil partner dies before you do, the pension debit will not be re-instated to you.
Any additional payments you’ve made to your pension pot, either via the BRASS or AVC Extra arrangements, will be included in the calculations at the time of divorce. They’ll form part of the total amount of your pension that will be shared between you and your ex-spouse or former civil partner.
However, if you have reached State Pension age before 6 April 2016, your ex-spouse could use your National Insurance contributions to increase their basic State Pension. This is only valid, though, if they don't remarry or enter a civil partnership before
they reach their State Pension age.
If you have a ‘protected payment’ stemming from the additional State Pension, you may have to share this with your ex-spouse. However, they’d lose this right if they remarry or enter a civil partnership.
The end of a long-term marriage or civil partnership could be a difficult experience as finances are likely to be heavily entwined. It’s important to know that any pensions that you and your ex-partner have will similarly be taken into account.
The Court will still decide to share your pension in one of the three ways outlined above – via a Pension Offsetting, Pension Attachment Order or Pension Sharing Order - however, it is the value of your pension in payment which is taken into
consideration in the financial settlement. This means that any lump sum you have already received or you are yet to receive and any amount of your pension you’ve taken already will be ignored.
The sharing of pensions in this situation can be complex and members may want to seek professional advice from a solicitor, actuary or independent financial advisor. Government-backed MoneyHelper has a retirement adviser directory to help you find the right support for you. They also offer a guidance appointment and a handy guide to help you consider the implications and to choose a legal and financial adviser if you need one.
The Court will require details of your pension benefits and some of the information you may need is:
The Scheme can only provide information on your RPS membership to you, your solicitor and the Court.
You’ll be required to pay an administration fee for a CETV quote and for the implementation of any order.
You can learn more about the options, process and charges in the ‘Guide for members on divorce and dissolution’
Go to MoneyHelper for an overview of the options available and the divorce process.
Unbiased.co.uk have provided some helpful information on how to protect your pension if you’re facing a divorce.