Our blog Pensions On Divorce: An Asset Not To Be Overlooked explains the importance of considering pensions when deciding how to resolve the matrimonial finances on divorce.
Here, we take a look at Pension Sharing Orders and highlight the key things to know when looking at obtaining and implementing pension orders.
What is a Pension Sharing Order?
A Pension Sharing Order (PSO) divides rights under a pension scheme so that each spouse has their own independent rights under that scheme or under two separate schemes. It is a cash lump sum (expressed as a percentage) to be paid from the member spouses’ pension to the other spouse. The payment is referred to as a pension credit. The payment is not paid directly to the non-member spouse. The pension credit is transferred to a pension scheme chosen by the non-member spouse, which could be an internal transfer (within the existing pension arrangement but as a separate fund if the scheme allows it) or an external transfer to a different pension scheme entirely.
When a PSO is made, whether by agreement (Consent Order) or a Final Order within Financial Remedy proceedings, the court must also approve and seal a Pension Sharing Annex. This document identifies the pension scheme which is to be debited. It provides the members and non-members information, states what percentage of the pension is to be transferred and how any pension sharing implementation fees are to be paid.
How is a Pension Sharing Order implemented
The PSO must be implemented by the pension scheme administrator to become legally effective. This cannot be done until 28 days after the PSO has been approved by the court and only once the Final Order in divorce has been obtained. The date the PSO takes effect is called the “transfer day” and will be the later date of these two events. The Final Order in divorce should not be applied for until after the 28-day period has elapsed. If the Final Divorce Order is granted before the lapse of the 28 day period, and if the member spouse were to pass away within that period the PSO would fail and the non-member spouse would lose any pension rights they might have had through the PSO or any entitlements under a widows/widower’s pension (as the parties would no longer be spouses).
Once transfer day has been established, the Final Financial Remedy Order or Consent Order, Pension Sharing Annex and Final Divorce Order must be sent to the pension scheme administrator to enable implementation of the order. The order should be implemented by the scheme within four months from when they receive all the relevant paperwork and any implementation fees (unless the order is subject to appeal).
At Ison Harrison our Family Law team have a wealth of experience in obtaining and implementing pension orders. You should ensure that you seek independent legal advice where pensions may be a factor to consider in any financial settlement. You can contact us on 0113 284 5000 or by email: family@isonharrison.co.uk.
