Pensions & divorce - frequently asked questions

If the scheme does not allow the ex-spouse/civil partner to become a member, the transfer value can be paid to another pension plan that is willing to accept it.

If the rules of the receiving scheme allow it, the value could also be transferred to a scheme the ex-spouse/civil partner is already a member.

Yes. Provided the pension credit originated from uncrystallised benefits. But if the pension credit originated from crystallised benefits such as an annuity, a defined benefit pension in payment or funds in drawdown, it is not possible for the ex-spouse/civil partner to take any tax-free cash. This is called a disqualifying pension credit.

No. Pension sharing is only an option on divorce. It is not an option for unmarried couples or couples not in a civil partnership.

No. As the ex-spouse/civil partner is not giving up any benefits in the defined benefit scheme, the pension transfer permissions are not needed.

Yes. State pensions, pensions inherited on death, including beneficiary drawdown, or any pensions which already have an earmarking order because of a divorce.

Anyone who had received a pension sharing order before 6 April 2006 was able to apply for an increase in the lifetime allowance to offset any 'pension credit' entitlement. This enhancement factor is known as “the pre-commencement pension credit factor”. The individual had to notify HMRC by 5 April 2009.

And while the lifetime allowance has been abolished from 6 April 2024, the credit factor enhances an individual’s lump sum and lump sum death benefit allowances.

Any 'pension debit' from a pension sharing order received before 6 April 2006 can be ignored.

HMRC Pension Tax Manual: PTM092200 - Protecting Pre-April 2006 pension rights: divorce

For pension sharing orders received since 6 April 2006 there are still 'debits' and 'credits'.

It is possible to qualify for a pension credit factor that will enhance an individual’s lump sum and lump sum death benefit allowances. To qualify for a pension credit factor the following conditions must be met:

• the pension credit is held in a registered pension scheme and was acquired on or after 6 April 2006, and
• it’s derived from a pension benefit from the same or another registered pension scheme that was already in payment to the original member at the time of the pension sharing order, and
• the original member became entitled to that pension in payment on or after 6 April 2006.

No entitlement to a pension credit factor arises if an individual acquires pension credit rights on or after 6 April 2006 but those rights were derived from:

• the pension of their ex-husband, ex-wife or former civil partner (the original member) that was in payment at the time of the pension sharing order, but which came into payment before 6 April 2006, or
• rights held by that ex-husband, ex-wife or former civil partner (the original member) that had not been crystallised at the time of the pension sharing order.

The deadline to apply for pension credit enhancements from previously crystallised rights is 5 April 2025.

The deadline is 31 January following the end of the tax year, 5 years after the end of the tax year in which they legally became entitled to the pension credit.

If 5 April 2025 is before this date, the deadline is 5 April 2025.

The date of the pension sharing order cannot be any later than 5 April 2024, as the lifetime allowance will be abolished from 6 April 2024.

HMRC Pension Tax Manual: PTM175400 - Lump sum allowance and lump sum and death benefit allowance: Enhancement factors: Pensions credit factor

A Pension Sharing Order can apply to pensions in payment. The capital value of Janet's pension will be shared in the agreed proportions. Her share will then be applied to provide a reduced pension for her, using her current age. Tony's share will be transferred as uncrystallised benefits to his pension scheme but with no tax-free lump sum entitlement (as this has already been paid when Janet first took her benefits). This is called a 'disqualifying pension credit'.

No. Pension schemes can deal with pension sharing orders by offering an external transfer, internal transfer or a choice between the two. An internal transfer is where the ex-spouse joins the scheme as a deferred member. Private sector pension schemes are almost certain to offer an external transfer although they could offer an internal transfer as an alternative. However unfunded public sector schemes can only offer an internal transfer.

No, a pension plan's value can only be split on divorce by a pension sharing order issued by a court. This will instruct the pension scheme administrator to transfer the agreed percentage of the pension plan's transfer value to the ex-spouse's pension scheme.

However, if they were getting divorced in Scotland, the divorcing couple could enter a ‘qualifying agreement’ between themselves. This is a written agreement between the two parties to the marriage which determines the financial settlement on divorce.