What are the stages in the pension sharing process?

What are the stages in the pension sharing process?

As part of the Divorce proceedings a couple can apply for ancillary relief. Financial matters are seen as ancillary (of secondary importance) to the divorce proceedings. The ancillary relief proceedings help the court achieve a clean break between the parties.

The overall objective of ancillary relief rules is that the Court can deal with cases justly and:

• save expenses;
• deal with cases in ways that are proportionate to the money involved and complexity of the case;
• deal expeditiously and fairly; and
• allot court resources appropriately to the resource and needs of the case.

There are 5 stages in a Pension Sharing process.

Stage 1 – Information to be provided

The member must apply for ancillary relief using Form A. 

The Court then fixes an appointment date and within 7 days of receiving notification of the date, the member must send a copy of the Form A to the scheme administrator.

The scheme administrator must provide the following information:

• the value of the member’s accrued pension rights. The day on which the CETV request is received is known as the Valuation Date;
• a statement summarising the way the transfer value is calculated;
• the pension benefits included i.e. lump sum death benefits, estimated PCLS and pension benefits on retirement, spouse’s benefits on death;
• AVC details;
• earliest date benefits can be paid;
• whether the scheme offers membership to the ex-spouse/civil partner and whether this requires employer and/or trustee approval (internal transfer);
• whether the scheme would transfer the ex-spouse/civil partner benefits to another qualifying arrangement (external transfer); and
• a schedule of charges for dealing with the PSO.

The basic information must be issued within 6 weeks of the request if the scheme is told that it is in conjunction with divorce proceedings and the scheme may charge for providing the information.

It is important to note that:

• If the member already has a transfer value statement that is less than 12 months old, that is sufficient for the first appointment date.
• The ex-spouse/civil partner is not entitled to receive any information at this stage.

Once the person with the pension rights has received the information from each pension arrangement; they have 7 days to send a copy of this to the other party.

Stage 2 – A possible Pension Sharing Order (PSO)

The scheme administrator will receive notification that a PSO may be made. At this stage the additional information to be issued includes the information listed below:

• Name and address of the scheme
• Type of scheme
• If the scheme is being wound up
• Details of any restrictions on the CETV
• If there are any previous Court Orders
• If any of the pension rights are not shareable
• If the member is a trustee

The information must be issued within 21 days of the request. 

Stage 3 – Receipt of formal PSO

When the PSO is received it should contain an annex and it must be stamped by the Court.

The scheme administrator must discharge its liability within 4 months from the first day they receive the information below:

• The Order of provision for ancillary relief, including the annex;
• Decree of divorce or nullity of marriage; and
• Information required by the Provision of Information Regulations 2000.

It is important to ensure that charges have been paid by the appropriate method chosen by the scheme.

The PSO will state the percentage of the benefits to be passed to the ex-spouse.

State Pensions cannot be subject to a PSO.

Stage 4 – Implementation

The time limit from the date of the PSO or receipt of the full information (if later) to implement the pension share is 4 months however, this can be extended by the Pension Regulator for example if a scheme is in wind-up.

If this deadline is missed the Pensions Regulator may impose penalties.

Transfer Day – this is the day the PSO takes effect. It may also be known as the effective date.Valuation Day – this is a day chosen by the scheme within the 4 month implementation period. It starts on the transfer day or, if later, the day the scheme has received all the information to implement the PSO.

How the PSO is implemented depends on whether an internal or external transfer is taking place.

Stage 5 – Post Implementation

Once the trustees have implemented a PSO they must issue a notice of discharge of liability to both the member and the ex-spouse/civil partner.

It must be issued within 21 days beginning on the day on which the discharge of liability in respect of the ex-spouse/civil partner’s pension credit is completed.