When a relationship ends Things to think about when your relationship comes to an end.

Contacting us

About The Pensions Advisory Service Pensions can change people’s lives. Most of us would like to be able to choose to stop work one day and choose how we live when we do. A good pension is a good way to achieve that. Our vision is a future where people are empowered to make the most of their pensions.

There are lots of ways you can contact us. Pensions Helpline

0300 123 1047

(Monday- Friday 9:00am- 5:00pm)

Web chat live The Pensions Advisory Service (TPAS) is here to give people professional, independent and impartial help with their pensions – for free.

www.pensionsadvisoryservice.org.uk

Online enquiry form www.pensionsadvisoryservice.org.uk/online-enquiry

Write to us

We are here to:  

give you independent information and guidance on pension matters mediate and resolve problems you may have with your pension

The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB

@TPASnews We will always try our hardest to help you with your pension query. Our service is about you and your needs. We will talk to you about the things that are important to you, helping you to navigate through all the options that may be relevant to your personal circumstances. At the Pensions Advisory Service, we understand pensions, and are passionate about making them accessible to you. We’ will always listen and offer you different ways to use our service.

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We regret that we are unable to accept visitors at our office. Please note that this guide is for information only. The Pensions Advisory Service cannot be held responsible in law for any opinion expressed, nor should any such opinion be regarded as grounds for legal action. The Pensions Advisory Service Limited. Company limited by guarantee. Registered in England and Wales No. 2459671. Registered Office as shown.

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What to do if things go wrong Unfortunately, even in the best run pension plans, sometimes mistakes are made or matters take longer than they should.

For example, the share agreed between you and your partner is not acted on correctly or a transfer takes too long and you lose money as a result. If you are concerned that a mistake or a delay has worsened the value of your pension you should contact the pension provider straightaway.

Introduction When a relationship ends, it’s hard. There are a lot of things to think about and for many pensions are the last thing on their mind. For a number of years, it has been a requirement for pensions to be included in a divorce financial settlement but we often find that many people do not realise this and this can have serious implications on their income in later life. This booklet looks at the issues you should consider, when a relationship that you’re in comes to an end in respect of your pension benefits.

If you remain unhappy with their response, speak to us. Our dispute resolution service is free and impartial, and largely provided by expert volunteers drawn from the pension industry. If matters have gone wrong we will work with you and the pension provider to put things right.

―temporary separation, divorce and dissolution, can all have serious implications on your future pension benefits‖

―don’t suffer in silence— we can help‖

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Overseas divorce or ending a civil partnership abroad Where a couple are divorcing or ending their civil partnership overseas and want to include any UK pension benefits in their financial settlement, the ex-spouse or ex-civil partner would, following an overseas divorce or overseas civil partnership dissolution, need to make an application for financial relief in a UK Court. The court can include an earmarking order or pension sharing order that would take your pension rights into account. In these circumstances, we would also recommend that you seek advice from legal experts.

Pension benefits not taken into account during financial settlement In certain instances, people who are already divorced or been in a civil partnership did not take any pension benefits into account during the financial settlement stage. The reasons for this range from; the deliberate withholding of pension benefit information by their former partner to, both parties being totally unaware at the time of divorce or civil partnership dissolution, that pension benefits should be taken into account during the financial settlement stage. In these circumstances, it is necessary to seek specialist independent legal advice to see if anything could be done to amend the position.

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Separation If you’re unmarried and separating

Things to consider 

Review what pension benefits you may already have - will they be sufficient for your needs in retirement?

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Does your employer offer a workplace pension scheme you can join? If so, you should consider doing this.

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If you are able to join an employers workplace pension scheme, either because your employer does not offer a scheme at present or because you are self-employed, you may want to consider paying into your own pension arrangement.

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Consider getting a State Pension Statement to see how much State Pension you are likely to receive, when your State Pension age is and whether you have any gaps in your National Insurance Contribution record. You can either telephone the Pension Service on 0845 300 0168 and ask for a Statement or go to www.gov.uk/state-pensionstatement where you can get a Statement online.

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If you’re unmarried and have separated, the Law says you aren’t entitled to a share of your former partners pension entitlement when he or she reaches retirement. Your former partner could have a pension arrangement which provides a death benefit. There are two types of death benefits; a lump sum death benefit and/or a pension. If your former partner is in an occupational pension scheme that provides death benefits, the scheme rules will state whether there is any provision for unmarried partners. The benefits may be a lump sum and/or a pension. More often than not, where the death benefit is a pension, it is only paid to a widow/widower or surviving civil partner or possibly a financial dependent. If you’re financially dependant on your former partner, you may be eligible. The rules on who receives any lump sum death benefit may be definitive, or it may be left to the discretion of the Trustees of the scheme. Where the death benefits are the value of the pension pot, typically a personal pension or stakeholder plan, the pension provider normally decides who should receive any lump sum. There is no guarantee that you would receive any payment. Your former partner may have completed a Nomination of Wishes form that states who he or she wishes the benefits to be paid. Even if you are nominated, the pension provider may not pay it out to you, but will look at the circumstances of your relationship. This would apply even if you had not separated.

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Things to consider 

Review what pension benefits you may already have - will they be sufficient for your needs in retirement?

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Does your employer offer a workplace pension scheme you can join? If so, you should consider doing this.

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If you are able to join an employers workplace pension scheme, either because your employer does not offer a scheme at present or because you are self-employed, you may want to consider paying into your own pension arrangement.

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Consider getting a State Pension Statement to see how much State Pension you are likely to receive, when your State Pension age is and whether you have any gaps in your National Insurance Contribution record. You can either telephone the Pension Service on 0845 300 0168 and ask for a Statement or go to www.gov.uk/state-pensionstatement where you can get a Statement online.

The pension awarded to the ex-spouse or ex-civil partner is called a “pension credit‟. If the ex-spouse or ex-civil partner can keep the benefit in the former spouse or former partners pension scheme, he or she becomes what is known as a “pension credit‟ member. The pension scheme may give the option or require the ex-spouse or excivil partner to transfer the benefits to another pension arrangement of his or her choosing.

If you have a pensions share of a public sector pension you may not have the option of a transfer of benefits. You will need to check with the pension scheme to find out if you can transfer your benefits.

For a member that has shared a pension benefit with an ex-spouse or ex-civil partner, the value of the pension credit awarded reduces his or her pension entitlement. This is known as a “pension debit‟. If you’re thinking about pension sharing and want to talk to someone about how this might relate to you and your pension plans give us a call on 0300 123 1047.

Case study

― we recommend you review your situation – especially if you rely on some or all of your partner’s pension ‖

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David and Sarah are divorcing and they live in Colchester. David has a pension worth £20,000 per annum. If the Court awarded that Sarah should have a pension credit of 60% of the pension, David would only receive 40% of the full pension entitlement.

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Pension sharing (Splitting)

Pension sharing (also known as pension splitting), offers a clean break settlement, where each party has independent pension benefits in their own right. Pension sharing involves getting the value of the pension benefits (usually the cash equivalent transfer value) of the pension benefits as at the date of divorce or the civil partnership dissolution date (or as at the date of petition or when the couple separated, if earlier, in Scotland). In Scotland, the Court usually only take into account benefits earned during the marriage or civil partnership, whereas, in the rest of the UK, all the benefits are usually taken into account, even those earned prior to the marriage or civil partnership.

The amount to be awarded may be decided by the Court or between the couple as part of the legal process. The pension scheme or pension provider can only act on a court order or a court order/ registered Minutes of Agreement, in Scotland. If benefits are shared, there is no set percentage and percentages can be awarded, between 1% and 100%. In Scotland, a fixed monetary amount can be awarded in place of a percentage.

Unlike pension earmarking, the additional State Pension, such as the State Earnings Related Pension Scheme (SERPS) and the State Second Pension (S2P), can be shared. Pension sharing involves getting a lump sum valuation of the additional State Pension benefit from the Pension Service. For further information on sharing the additional State Pension, we suggest you contact the Pension Service on 0845 606 0265. The Government propose to introduce a new State Pension system from 6 April 2016 where the new rules will not allow pension sharing of any additional State Pension, except in certain limited cases. 12

If you are married or in a civil partnership and are separating If you’re married or in a civil partnership and you separate, the Law says you’re not entitled to a share of your former partners pension entitlement. Any entitlement to your former partners pension can only be applied on divorce or civil partnership dissolution. Your former partner could have a pension arrangement which provides a death benefit. There are two types of death benefits; a lump sum death benefit and/or a pension. If your former partner is in an occupational pension scheme that provides death benefits, the scheme rules will state whether there is any provision for the spouse or civil partner. The benefits may be a lump sum and/or a pension. More often than not, where the death benefit is a pension, it is paid to a widow/widower/civil partner or possibly a financial dependent. The rules on who receives any lump sum death benefit may be definitive or it may be left to the discretion of the trustees of the scheme. Where the death benefits are the value of the pension pot, typically a personal pension or stakeholder plan, the pension provider normally decides who should receive any lump sum, so there is no guarantee that you would receive any payment. Your former partner may have completed a Nomination of Wishes form that states who he or she wishes the benefits to be paid. Even if you are nominated, the pension provider may not pay it out to you but will look at the circumstances of your relationship. This would apply even if you had not separated. If you’re married or in a civil partnership and you’re legally separated (i.e. a decree of judicial separation in England, Wales and Northern Ireland), the Court can make an earmarking order against your formal partners benefits. Earmarking is covered further ahead in this booklet.

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―we can help you review your situation and explain all the options‖

Case study Martin and Julie are divorcing . Martin has a pension worth £20,000 per annum all of which is taxed at 20%. If the Court awarded each of them a settlement of 50% of the pension, Martin would be required to pay 50% of his net pension income, £9,000 per annum to Julie and he would retain the remaining £9,000.

Things to consider 

Review what pension benefits you may already have - will they be sufficient for your needs in retirement?



Does your employer offer a workplace pension scheme you can join? If so, you should consider doing this.



If you are able to join an employers workplace pension scheme, either because your employer does not offer a scheme at present or because you are self-employed, you may want to consider paying into your own pension arrangement.



Consider getting a State Pension Statement to see how much State Pension you are likely to receive, when your State Pension age is and whether you have any gaps in your National Insurance Contribution record. You can either telephone the Pension Service on 0845 300 0168 and ask for a Statement or go to www.gov.uk/state-pensionstatement where you can get a Statement online.

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Pension earmarking is less common these days with most people preferring either pension offsetting or pension sharing so that there is a clean break from the ex-spouse or ex-civil partner. The rules around earmarking can be quite complex so, if this applies to you, please contact our helpline and we can talk you through the things you may need to be aware of.

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Divorce 2.

Pension Earmarking

Pension earmarking (or an attachment order as it is now known in England, Wales and Northern Ireland) also involves getting the value of the pension benefits (usually the cash equivalent transfer value) as at the date of divorce or civil partnership dissolution date (or as at the date of petition or when the couple separated, if earlier, in Scotland). In Scotland, the Court usually only take into account benefits earned during the marriage or civil partnership, whereas, in the rest of the UK, all the benefits are usually taken into account, even those earned prior to the marriage or civil partnership. Earmarking is an agreement that when a benefit comes into payment, a part (or all) of it is paid to the former spouse or civil partner. The Court instructs the pension scheme or pension provider to make this payment by way of a court order. The amount to be awarded may be decided by the Court or between the couple. The pension scheme or pension provider can only act on a court order. The percentage is paid when the ex-spouse or ex-civil partner takes their benefits or when they die with a lump sum death benefit. In England, Wales and Northern Ireland, the payment can be taken from the pension and/or tax-free lump sum. In Scotland, it can only come from the tax-free lump sum. Any pension in payment is taxed as the member’s income and earmarked payments are paid to the ex-spouse or ex-civil partner after tax. For this reason, pension providers are likely to require the order to specify that the member (not the pension provider) is responsible for the actual payments to the ex-spouse or the ex-civil partner. The pension income stops on the death of the member therefore, the shared income to the ex-spouse or ex-civil partner will also stop.

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If you’re married or in a civil partnership and you decide to divorce or dissolve your civil partnership, the Court is required to take any pension rights into account. There are three different ways for dealing with pensions on divorce or on civil partnership dissolutions conducted through the Court. The decision on which option is chosen will be either by agreement between the couple, or decided by the Court. The three different options are - Pension Offsetting, Pension Earmarking and Pension Sharing. Pension Earmarking is becoming less common, so we provide a brief summary only. If earmarking relates to you, please contact our helpline and we can give you more information.

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Pension Offsetting

Pension offsetting normally involves getting the value of the pension benefits (usually the cash equivalent transfer value) as at the date of divorce or the civil partnership dissolution date (or the date of petition or when the divorcing couple or civil partners separated, if earlier, in Scotland). In Scotland, the Court usually only take into account benefits earned during the marriage or civil partnership, whereas, in the rest of the UK, all the benefits are usually taken into account, even those earned prior to the marriage or civil partnership. This value would then be included in the total value of the matrimonial or civil partnership estate, to be divided on divorce or civil partnership dissolution. The pension benefits are offset against other assets. Case study Brian and Susan are divorcing. Brian has a Personal Pension worth £200,000 and the family home is worth £300,000. There are no other assets of the marriage. Therefore the total assets are worth £500,000. If the Court awarded each of them a settlement of 50% of the matrimonial estate, Susan would get £250,000 of the equity in the home and Brian would keep his pension and get £50,000 of the equity in the home. 9