How To Implement a Pension Sharing Order In Divorce (UK)
In this article, you'll learn the exact steps you need to follow to implement a pension sharing order following a divorce or dissolution.
Table Of Contents
The process of implementing a pension sharing order involves communication with pension providers and the execution of the pension share with the court.
Below are the necessary steps involved in implementing a pension sharing order:
Step 1 – Obtain the final order of divorce or dissolution:
The pension sharing order cannot be implemented until after the final order of divorce or dissolution has been obtained.
If the order has been made, but the final order is still pending, it’s crucial to obtain it promptly.
This is because, in the event of the death of one of the parties after the pension sharing order has been made, but before it has become effective, the estate may miss out.
Therefore, specific advice should be sought on this matter.
Once the final order is received, a sealed copy must be sent to the pension provider.
Step 2 – Send documents to the pension provider:
Normally, the final court order will direct one of the parties, or the court itself, to send the necessary documents to the pension provider.
However, it’s advisable to send them twice, just to be sure.
The provider will typically require copies of the final court order, including the Pension Sharing Order, and a copy of the final order of divorce or dissolution.
Step 3 – Valuation of Pension Assets
Before a pension sharing order can be implemented, the pension assets will need to be valued.
This is to ensure that both parties are aware of the value of the pension and what percentage of it will be shared.
The value of the pension will be based on the cash equivalent transfer value (CETV) of the pension scheme.
Step 4 – Respond to requests from the pension provider for further information:
Upon receiving the Pension Sharing Order, the pension provider will either issue a ‘notice of implementation’ if they have all the required documents and information, or they will request further information.
For example, they may need details about which pension scheme the benefits of the Pension Sharing Order should be transferred to, particularly if they are being transferred out to a different scheme.
Step 5 – Obtaining a Pension Sharing Annex
Once the court has decided to grant you the order, the spouse who is entitled to a share of the pension will need to obtain a pension sharing annex.
This is a legal document that sets out the details of the pension sharing order.
The annex will need to be sent to the pension provider, who will then implement the order.
Step 6 – Pay the pension sharing fees:
Some pension schemes, particularly those in the public sector, can charge to implement a pension sharing order.
The final court order should specify who will be responsible for paying these fees or in what proportion they will be shared.
It’s important to note that the fees must be paid before the pension share is implemented.
Once the pension provider has all the necessary information, they typically have four months to implement the pension sharing order.
What You Need To Consider Post-Implementation
Once a pension sharing order has been implemented, it is important to consider the tax implications and long-term financial planning.
It is essential to understand the tax implications of a pension sharing order. The receiving party will be liable for income tax on any pension payments received, while the transferring party will be liable for any tax charges that may arise due to the transfer.
It is advisable to seek professional advice to ensure that all tax implications are understood and managed effectively.
Long-Term Financial Planning
After a pension sharing order has been implemented, it is important to consider long-term financial planning.
The receiving party should review their financial situation and consider how the pension payments will fit into their overall financial plan.
They may also wish to seek professional advice to ensure that they are making the most of their pension payments.
It is important to consider the long-term financial implications of a pension sharing order, particularly if the receiving party is relying on the pension payments as their primary source of income in retirement.
They should consider their future financial needs, such as healthcare costs, and ensure that they have a solid financial plan in place.
Need Help Splitting Pensions in Divorce?
Pension sharing is one of three approaches available to couples splitting pensions as part of a divorce or dissolution of a civil partnership.
You should read our article comparing pension sharing vs pension offsetting to help you understand which approach might be suitable for your circumstance.
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