Frequently Asked Questions (FAQ)
Pensions and divorce
How are pension sharing orders effected before A-Day, treated from A-Day? |
A pension sharing order is issued by a court. It makes provision for the pension rights of a scheme member to be split on divorce and details how much the 'pension debit' and 'credit' will be. A 'pension debit' reduced the value of the scheme member's pension benefits. For anyone in an occupational pension scheme (e.g. EPPs, CIMPs, S32s) the 'pension debit' still has to be taken into account when calculating their maximum benefits. It was still treated as a benefit for that person even though it's actually payable to someone else. |
How are pension sharing orders effected before A-Day, treated from A-Day? |
Anyone who had a pension sharing order effected before A-Day will be able to apply for an increase in the lifetime allowance to offset any 'pension credit' entitlement. However, this will not be available for anyone who wishes to opt for primary protection. Any 'pension debit' from a pension sharing order effected before A-Day can be ignored. This means that those who may need to apply for transitional protection can exclude the value of any 'pension debit', but it will still have to be taken into account when calculating maximum benefits at 5 April 2006. |
For pension sharing orders effected after A-Day there are still 'debits' and 'credits'. Maximum benefits will be based on the lifetime allowance as opposed to all the tax regimes we had. A 'pension credit' will count towards the lifetime allowance of the ex-spouse. A 'pension debit' will not count when testing benefits against the lifetime allowance. The new rules give everyone their own lifetime allowance and it is only the benefits that they actually receive that will be tested against it. |
