Pension Sharing Orders

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Legal gavelIf the Court issues a Pension Sharing Order, or your benefits are subject to a qualifying agreement in Scotland, part of your benefits are transferred into your ex-spouse's or ex-civil partner’s possession. They will keep that share even if your or their circumstances change.

Your ex-spouse or ex-civil partner will hold those benefits in their own right. They can be left in the scheme and are normally paid from their Normal Pension Age, or can be drawn on or after age 55 with a reduction for early payment, or can be transferred to another qualifying pension scheme. Your ex-spouse or ex-civil partner must draw their benefits before their 75th birthday.

Your pension and any lump sum will be reduced by the amount allocated to your ex-spouse or ex-civil partner at the point of divorce/dissolution.  

The reduction to your benefits is known as a Pension Debit.  The amount of the Pension Debit will be increased in line with the rise in the cost of living between the date it was first calculated and the date your benefits are paid. When your benefits are paid, the revalued amount of the Pension Debit will be deducted from your retirement benefits.

You may be able top up your benefits by buying extra scheme pension, through Additional Pension Contributions (APCs), paying Additional Voluntary Contributions (AVCs) or Free Standing AVCs (FSAVCs), or by paying into a concurrent personal pension plan or stakeholder pension scheme in order to make up for the benefits 'lost' following a Pension Share.

You can still transfer your remaining benefits to another pension arrangement on leaving the LGPS. If you transfer within the LGPS, your new fund will reduce your benefits by the Pension Debit at retirement.

In assessing the value of your benefits when you draw them against the value of all the pension savings you are allowed before you become subject to a tax charge - the Lifetime Allowance (LTA), the reduced value of your benefits after the Pension Debit has been deducted will be used. The lifetime allowance for 2017/18 is £1 million.

 
Most scheme members’ pension savings will be significantly less than the LTA.
 
If you are a high earner affected by the introduction of the LTA from 6 April 2006, a Pension Debit may affect any LTA protection you may have.
 
Also, in assessing the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge - the Annual Allowance, the reduction in your benefits due to the Pension Debit is ignored in the scheme year that the Pension Sharing Order or qualifying agreement is applied to your benefits.
 
You can find out more about these matters in the section, Tax controls and your LGPS benefits.