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Pension on Divorce (NIFRS)

Introduction

The Welfare Reform and Pensions Act 1999 enabled ‘Pension Sharing on Divorce.’ They introduced new provisions to enable pension rights within the Firefighter Pension Schemes to be shared (or split).

The new regulations supplement the existing provisions for the ‘earmarking’ of pension rights, which were introduced by the Pensions Act 1995.

Earmarking is where a proportion of the member’s benefits are paid to the former spouse when the member retires or dies (this can be in the form of a lump sum or part of a pension). Earmarking has been little used to date, as it does not offer a clean break settlement, and it can be uncertain (for example, the member whose pension is earmarked may die first, leaving nothing for the former spouse).

Pension sharing provisions apply to all divorce proceedings that commence after 1 December 2000, but do not apply to judicial separation. It is not compulsory and is an alternative to the earmarking provisions (which remain the only option for judicial separation cases). The exact commencement date for divorce proceedings (which may be important) is determined by documents that are signed by the petitioner and the respondent.

The overriding legislation recognises that there is a significant increase in the amount of administration by pension schemes required in dealing with these cases. Administrators are able to make charges for the provision of information in certain cases and for implementing a ‘Pension Sharing Order,’ a charging schedule for Your Pension Service is available.

Who May be Affected?

Full details of the cash equivalent value of the scheme member’s accrued pension rights in the Firefighter’s Pension Scheme are provided to the Court. This value is taken into account by the Court, together with all the other assets of the divorcing couple, when determining the settlement.

A Court Order is made defining the split of pension rights. The scheme member’s pension rights are immediately debited and the former spouse becomes a ‘Pension Credit Member’ in the Firefighter’s pension Scheme, with an entitlement to a pension and an option to commute some of this in favour of a lump sum. If the scheme member is already in receipt of their pension the pension credit member would not have the option to commute some of the pension in favour of a lump sum.

The benefits will be paid according to the scheme the Pension Sharing Order is applied to as follows:

  • FPS 2007 – benefits payable from age 60
  • NFPS 2007 – benefits payable from age 65
  • NFPS 2007 (Modified) – benefits payable from age 60
  • CARE 2015 – benefits payable from age 65 or State Pension Age if higher.

Please note that benefits may be awarded in more than one scheme if relevant.

The scheme member receives information about the effect of the ‘Pension Sharing Order’ on their pension rights. The pension credit member is provided with a statement giving details of their new rights.

Following Implementation of a Pension Sharing Order:

The Scheme Member (debit member):

The following are key points relevant to pension debit members:

  • The debit member’s pension rights will be reduced to take account of the pension sharing order, in accordance with instructions provided by the Government Actuary’s Department.
  • A spouse’s ordinary award will be reduced to take account of the pension sharing order.
  • Children’s benefits are attached in full to the debit member’s pension rights and will be assessed as if no pension sharing order has been made.
  • If the debit member remarries and that subsequent marriage breaks down, his/her pension rights (as reduced by the pension sharing order) could be subject to another pension sharing order.

The Pension Credit Member (former spouse):

  • Former spouses who become pension credit members of the scheme will not be allowed to transfer their rights into another scheme.
  • Pensions for pension credit members will be payable as follows
    • FPS 2007 – benefits payable from age 60
    • NFPS 2007 – benefits payable from age 65
    • NFPS 2007 (Modified) – benefits payable from age 60
    • CARE 2015 – benefits payable from age 65 or State Pension Age if higher.
  • There is no provision for early payment of main scheme benefits on ill-health grounds.
  • Part of the pension can be commuted into a lump sum, within normal Inland Revenue limits (up to two and a quarter times the annual pension), unless the fire fighter has already taken a commuted lump sum before the sharing order comes into effect.
  • If the credit member dies before the pension becomes due, a death grant of two and a quarter times the value of the uncommuted pension at the date of death will be payable to the estate of the credit member.
  • No spouse’s benefits will be payable in respect of the pension credit.
  • No children’s benefits will be payable in respect of the pension credit as these will remain attached in full to the debit member’s benefits.
  • Pensions for credit members will be indexed with effect from the date the pension sharing order takes effect.

Summary

If divorce proceedings commence after 1 December 2000, a court may make an order to share or ‘split’ pension rights. The sharing of pension rights is not compulsory and is merely an alternative to earmarking provisions that have existed for the past few years. When making a decision the court will take into account all the assets of the couple, for example any property, investments etc in addition to both sets of accrued pension rights. If an order is made the member’s pension rights are reduced and the former spouse becomes a ‘Pension Credit Member’ with specific rights within the FPS.

How to request a CETV

The request must come from your solicitor, and must be in writing or via email and include your Letter of Authority (LOA) so we can liaise with your solicitor on your behalf.

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