Divorce and the NHS Pension Scheme

The value of an individual's pension benefits are now seen as an integral part of a person's assets in the situation of divorce.

From 5 December 2005 civil partnership couples have the same rights as married couples on the dissolution of the civil partnership.

Since December 2000 the NHS Pension Scheme, in line with all other pension schemes, has arrangements for 'Pension Sharing' on divorce. These arrangements also apply to the New NHS Pension Scheme. In addition the scheme will also allow earmarking.

What is Pension Sharing?

Pension sharing is where a court serves a Pension Sharing order on the scheme. When the divorce court orders the pension to be shared up to 100% of the members benefits can be awarded to the former spouse or civil partner. The member's pension benefits are reduced accordingly.

A capital amount calculated to be equal to the members share is paid out and this must be invested into another pension arrangement.

What is Earmarking?

Earmarking is the term used to describe special attachment orders, made by the court. This arrangement differs from Pension Sharing, as no capital sum is paid out of the scheme, but an amount of pension is earmarked (set aside) for the benefit of the former souse or civil partner meaning that they have a 'Shadow Membership' of the NHS Pension scheme.

An order is issued by the divorce court to the NHSPA who will have to acknowledge that Earmarking has taken place.

As an alternative to either Pension Sharing or Earmarking, an Offset agreement may be reached as part of the divorce settlement.

What is Offsetting?

Offsetting is an arrangement whereby an asset or capital sum is given up by the member of an equal value to their NHS pension benefits remain untouched.

In order for the value of the members NHS Pension benefits to be established a Cash Equivalent Transfer Value (CETV) will have to be obtained from the NHS Pensions Agency.

The issues surrounding divorce and the NHS Pension scheme are complex and specialist Legal & Financial advice must be taken as once a Degree Absolute is granted by the divorce court settlements which may have involved the NHS Pension scheme cannot be revisited.

Link to Collaborative Law website

When faced with this situation you must seek the assistance of qualified professionals who can assist you.

Dealing With the Lifetime Fund Limit