What’s a Pension Sharing Order?
As part of the financial settlement in a divorce, a court may order your former partner to split their pension with you in a process called ‘pension sharing (PSO)‘. If this happens you’re entitled to take a share of their pension straight away and may be able to join their pension scheme or move it into a pension of your own. Not all pension providers will accept a transfer of this nature, so you’ll need to speak to the company you wish to transfer to before taking any action.
A pension attachment or earmarking order, on the other hand, redirects part or all of the member’s pension benefits to the ex-spouse or civil partner when they start withdrawing.
How does a Pension Sharing Order work?
A Pension Sharing Order’s a court order that allows couples to divide their pension funds upon divorce. The court has the power to divide both defined benefit and defined contribution pensions, but not your State Pension benefits.
Both parties will need to provide financial information to the court in order to calculate the amount of the Pension Sharing Order. The split’s calculated using a formula that considers the age, earnings and other factors related to the couple’s finances. The spouse receiving the split portion can transfer it to a pension of their own, or in some cases join the original pension scheme.
How long after a divorce can you request a Pension Sharing Order?
When a couple gets divorced their pensions are usually included in the financial settlement along with property and other assets. Without a ‘consent’ or court order confirming the settlement, both parties can make a claim on their former partner’s pension, regardless of how long they’ve been divorced.
How long does it take to carry out a Pension Sharing Order?
The length of time it takes to set up a Pension Sharing Order depends on the complexity of the case and the speed of the pension provider. Once the order’s been issued, the pension administrator has up to four months (from the point of receiving all relevant information) to carry out the Pension Sharing Order.
Are there restrictions for pensions which are already paying out?
No, even pensions in drawdown can be divided. The remaining balance can be shared between the parties if it’s deemed appropriate to do so.
Which type of solicitor and court handles Pension Sharing Orders?
Only the Family Court has the power to grant Pension Sharing Orders. Typically both parties will seek legal representation from a specialised Divorce Solicitor to file paperwork on their behalf and advocate for their best interests during court proceedings. Not all divorces will result in a Pension Sharing Order.
What are the pros and cons of Pension Sharing Orders?
Here’s some considerations when applying a Pension Sharing Order to a divorce:
Pros of applying Pension Sharing Orders:
- Ensures both parties are provided for following the divorce proceedings.
- May increase the pension savings of one spouse.
- Allows for both parties to have a clean break, financially.
Cons of applying Pension Sharing Orders:
- Fees may be taken from the pension to cover the Pension Sharing Order costs.
- May decrease the pension savings of one spouse, which they may have relied upon to support their retirement income, had the marriage not resulted in divorce.
- Higher earners may be impacted by an increased pension pot triggering the Lifetime Allowance*.
*From the 2023/24 tax year, the Lifetime allowance charge has been abolished and you’ll instead pay income tax charged at your marginal rate on any payments above the lifetime allowance. From the 2024/25 tax year, the lifetime allowance will be fully abolished through a future Finance Bill.
How PensionBee manages Pension Sharing Orders
We understand that divorces are often difficult experiences. PensionBee customers are supported throughout the Pension Sharing Orders process by their BeeKeeper. Here’s our step-by-step guide of how to begin the Pension Sharing Order process with us.
Before the Pension Sharing Order’s requested:
- If applicable, send us your Inquiry Form. In most cases this form’s needed by the court when a Pension Sharing Order’s being made and requires both parties’ pension providers to fill out details of the pension savings held with them. It also checks if the provider’s happy to receive an incoming amount from the Pension Sharing Order, if the court orders it.
- We’ll complete your Inquiry Form. Once your BeeKeeper’s received the Inquiry Form, they’ll begin filling it out and will send back a completed version for your divorce proceedings as soon as possible. You can share this with the courts to help them reach a decision on any financial settlement they choose to make.
If the Family Court requests a Pension Sharing Order:
- Inform your BeeKeeper. Your BeeKeeper will need a scanned copy of the following documents: the court stamped Decree of Absolute, the full Consent Order, and the General Order (also known as Pension Sharing Order or Pension Sharing Annex). If we’re splitting your pension, we’ll also need these documents to be certified, which a solicitor can help with, for example.
- We’ll check your documents. Our Compliance Team will review your scanned documents to ensure everything’s in order. If we’re splitting the pension, we’ve got four months from receiving all valid documents to process your Pension Sharing Order transfer. If we’re receiving a split portion, the other provider will have four months to complete this. The next steps differ based on if you’re ‘receiving’ or ‘splitting’ funds.
If you’re receiving funds from a Pension Sharing Order, we’ll need to send a special Letter of Authority (LOA) to your former spouse’s pension provider. We’ll have their details from the Pension Sharing Order/Annex, so no extra steps are needed from your side.
If you’re splitting funds with your former spouse, we’ll need the receiving scheme to reach out to us with their request instead. Please note in some cases we may need to briefly pause contributions or withdrawals from your pension so your remaining balance can be split and sent to your former spouse’s pension provider. We’ll be sure to inform you if that’s required.
At PensionBee we strive for total transparency about our pensions. We have an annual management fee based on the value of your pension pot. We don’t charge you any additional fees to process your Pension Sharing Order.
In episode 14 of The Pension Confident Podcast, we discuss the impact your relationship status has on your finances - whether you’re single, cohabiting, separated, divorced, or widowed. Hear from the Founder of This Girl Talks Money; Ellie Austin-Williams, Barrister and Family Mediator; Paul Infield and Director (VP) Public Affairs at PensionBee; Becky O’Connor and listen to the episode, watch our guests in the studio or read the transcript now.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 10-07-2023
