Pensions and divorce: our top five frequently asked questions
We look at pensions and divorce in the latest in our series of top five FAQs on pensions technical topics.
- What can the ex-spouse/civil partner do with a pension credit?
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.
The value could also be transferred to a scheme the ex-spouse/civil partner is already a member of, if the rules of the receiving scheme allow it.
- Is it possible to take tax-free cash from a pension credit?
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.
- Is it possible to apply a pension sharing order when you are not married or in a civil partnership?
No. Pension sharing is only an option on divorce. It is not an option for unmarried couples or couples not in a civil partnership.
- When giving advice on a pension credit coming from a defined benefit scheme where the only option is a transfer out, are the pension transfer permissions required?
As the ex-spouse/civil partner is not giving up any benefits in the defined benefit scheme, the pension transfer permissions are not required.
- Are there any pensions which can’t pay a pension credit to an ex-spouse/civil partner?
Yes. State pensions, pensions inherited on death including beneficiary drawdown or any pensions which already have an earmarking order as a result of a divorce.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.