The main features of pension sharing and its administrative treatment within the rules of the Armed Forces Pension Schemes and Reserve Forces Pensions Schemes are referred to here. The information contained on this page is only a guide and you are advised to seek independent legal advice regarding the best options available when looking at financial provisions as a result of a divorce / dissolution.
Civil Partnerships
The information provided may refer to arrangements following a divorce. However with the commencement of the Civil Partnership Act (CPA) 2004, similar provisions will apply when a civil partnership is dissolved.
Powers of the Court
The courts have powers to take account of pension assets in divorce or dissolution settlements. Options available to the court include:
No Order: The court can decide that no settlement is required to create a clean break(this may be the case where both parties have similar pension provisions in their own right)
Offsetting: This is the reallocation of other property or assets held individually, severally or in common by parties to the divorce / dissolution. In other words the value of your pension rights can be offset against other assets (e.g. property, savings etc.)
Attachment and Earmarking Orders: In England, Wales and Northern Ireland: Making a pension Attachment order (AO) so that your former spouse or civil partner in the divorce or dissolution settlement receives payments from your pension either as a lump sum or by periodical payments.
In Scotland: Making a pension Earmarking order (EO) which has the effect of a lump sum payment being made to your former spouse or civil partner from your pension benefits.
Pension Sharing: Making a Pension Sharing Order (PSO) so that a share of the value of your pension is transferred to your former spouse or civil partner who will become a member of the scheme in their own right and be known as the Pension Credit Member (PCM).
Care should be taken not to confuse Pension Sharing Orders (PSOs) with Attachment Orders (AOs) and Earmarking Orders(EOs) as there are major differences.
Attachment Orders (AOs)
A court may order that any percentage of your pension benefits may be paid to your former spouse or civil partner. Courts in England, Wales and Northern Ireland can make Attachment orders for members of AFPS 75, FTRSPS 97, AFPS 05 and RFPS 05 specifying:
- An order requiring SPVA to pay part or your entire pension to your former spouse or civil partner when the pension becomes payable.
- An order requiring SPVA to pay part or your entire pension lump sum to your former spouse or civil partner when it becomes payable.
- An order requiring SPVA to pay part or all of any lump sum benefit to your former spouse or civil partner if you die in Service.
This type of court order is binding on the scheme administrators (Service Personnel and Veterans Agency (SPVA)) of the pension scheme.
Unlike Pension Sharing, attaching does not involve a clean break between the two divorcing parties, under Attachment orders the member retains ownership of his or her own pension. Unlike pension sharing if you die or either your former spouse remarries or your civil partner enters into a new civil partnership he or she will no longer receive any benefits under an Attachment order except for the death in Service lump sum benefit where it is payable to your former spouse or civil partner.
Attachment orders can be:
- Varied if the financial situation changes.
- Void on the occurrence of notifiable events e.g. remarriage.
- Can be used to ensure earlier payments to your former spouse or civil partner, as the benefits become payable to the former spouse or civil partner when they become due to the scheme member.
- Used to target death in Service benefits.
Pension Sharing, how it works and Pension Sharing Charges
Pension Sharing
Since the early 1970’s, the courts have been required to take into account the value of any pension held by both parties to a divorce in determining their financial settlement. However, before the introduction of pension sharing it was not possible to transfer either the value of the pension benefits or benefits themselves from the scheme member who owned the benefits to another person.
The Welfare Reform and Pensions Act 1999 introduced pension sharing as an option available for divorce cases where the proceedings were lodged on or after 1 December 2000.
One of the main benefits of pension sharing is that it helps to achieve a clean break settlement for the divorcing couple. Its aim is to provide a secure income in retirement for the former spouse and enables both parties to become financially independent of each other. It allows pension benefits to be treated like any other asset and allows a proportion, or the whole of the value to be transferred from the scheme member to the former spouse. The payment of the pension will be direct to the former spouse and will not be affected by changes after the divorce to the circumstances of the scheme member.
Pension sharing results in the physical and legal, transfer of pension benefits from one party to another. Once the sharing arrangement has been completed it is permanent and cannot be undone. This means that all parties involved should ensure that the member and former spouse are aware of the likely outcome and take independent advice where necessary.
Pension Sharing - How it works
The first thing the member needs to do when considering their pension benefits in their divorce / dissolution is to request in writing to the Service Personnel and Veterans Agency (SPVA) a valuation of their sharable pension benefits (Cash Equivalent Transfer Value) in the pension scheme. The member will be sent an application form to complete and SPVA will provide the information within six weeks of the request being received. Where charges are applied however, all charges must be paid before the information is provided.
If a pension sharing order is considered appropriate the court will decide how the value (this is normally a percentage) should be apportioned. The day on which the court makes the order is known as the Transfer Day. Court orders take affect on the date on which they are made (however, there is an opportunity to appeal against the order).
SPVA, the scheme administrators, will revalue the member’s pension benefits and implement the Pension Sharing Order within a four month period, which begins with the day on which SPVA has received the entire relevant pension sharing documentation including payment of any administrative charges, or on the date the Pension Sharing Order takes effect, whichever is the later. This is know as the Implementation period; it is within this period that the scheme administrators will select a date on which the member's shareable pension benefits are revalued and is known as the Valuation Day.
Once the valuation has been carried out the member's pension will be reduced by the value of the shareable pension benefits (the percentage ordered by the court). The amount of the member’s pension remaining to the member is known as the pension debit and the member will become known as the Pension Debit Member (PDM).
By applying the percentage set by the court order to the value of the pension benefits on the Valuation Day, SPVA calculates the pension credit it must make to give benefits to the former spouse/civil partner. The amount of the member’s pension transferred to the former spouse or civil partner will be known as the Pension Credit and the former spouse or civil partner will be known as the Pension Credit Member (PCM).
The earliest age the former spouse or former civil partner can claim their pension is age 60 or 65 depending on the rules of the scheme. PCM’s may now claim their benefits at age 55 or current age if over 55, rather than age 60 or 65, but their benefits will be adjusted for early payment. They can write to SPVA (Glasgow) requesting a pension forecast of how much their pension will be worth following adjustment if they were to draw it from age 55 (or older if they are already over age 55). If they are content with the figures, they can request SPVA (Glasgow) to pay at the earlier age.
Pension Sharing Charges
For details of the charges relating to pensions on divorce / dissolution within the SPVA charging regime see Key Documents under Related Pages for Pensions Sharing Charges.
Pension Sharing in Scotland
In Scotland, matrimonial law differs to that in England and Wales. Where the financial settlement is decided by a Scottish court the following points differ to that made in English law:
- Scottish law sets out a definition of matrimonial property that needs to be quantified by you and your spouse / civil partner, or the court.
- Your pension benefits will be that part of those benefits that you earned or purchased during your marriage / civil partnership up to the date on which you ceased to cohabit as husband and wife / civil partners, or the date on which the summons was served in the action for divorce / dissolution, if you continue living together.
- If you agree with your former spouse / civil partner that your marriage ended on a date more than 12 months before the divorce / dissolution, then SPVA will supply you with a valuation of benefits as at that date.
How do I get a CETV for divorce / dissolution purposes
A CETV or any detailed information about the benefits you are due as a scheme member can only be disclosed to you as the scheme member, or to your solicitor. Your spouse or civil partner(or their solicitor) can only request general information about the scheme.
As the scheme member you can ask for a valuation which will tell the court what your pension benefits are worth when considering the assets relating to a marriage / civil partnership. When asking for a CETV estimate, you must state that the request is in connection with divorce / dissolution proceedings.
Please complete AFPS/Divorce/2 – Request for assessment of pension scheme benefits or Cash Equivalent Transfer Valuation for divorce / dissolution proceedings - see Pension Forms under Related Pages and send to SPVA (address at the bottom of this page).
SPVA will provide a CETV within 6 weeks of the request if it is stated that this is in connection with divorce / dissolution proceedings. If court proceedings have already commenced when requesting the CETV please notify SPVA of this.
Making Contact with the SPVA
Unit administrative or personnel staff can only provide information and an explanation of benefits under the schemes; they cannot take responsibility in relation to your pension decisions. Your best option will depend on your own particular circumstances and you should seek independent legal or financial advice. In addition, Service Personnel and Veterans Agency (SPVA) can provide you with a CETV in preparation for a divorce or dissolution settlement. Correspondence in relation to divorce or dissolution should be clearly headed as such and sent to the following address:
Pensions on Divorce Section
Mail Point 480
Kentigern House
65 Brown Street
Glasgow
G2 8EX
Tel (Civ): 0800 085 3600 (or outside UK phone 0044 141 224 3600)
Tel (Mil): 94560 3600
Monday to Friday 0700 – 1900
Fax(Civ): 0141 224 3586
Fax(Mil): 94561 3586
Email:
JPAC@spva.mod.uk