Since the 1970s courts have had to take into account the
value of pension rights in divorce settlements so that these could
be offset against other assets. The Pensions Act 1995 provided for
courts to require pension schemes to pay maintenance via a Court
Order from a member’s pension to their ex-spouse and to order
part or all of a lump sum payable on the death or retirement of a
scheme member to be directed to the ex-spouse. This is known as
Pension Earmarking.
This guidance will also apply to civil partners (
IHTM11032) after 5 December 2005
The IHT position will depend first of all on whether the
death benefit is held (
IHTM17152) on discretionary trusts or
not (
IHTM17153) at the date of the divorce
or dissolved civil partnership/earmarking.
The Welfare Reform and Pensions Act 1999 and other related
legislation made provision for clean break settlements by means of
Pension Sharing whereby the ex-spouse or civil partner (
IHTM11032) would become entitled to
benefits in their own right, debited from the rights of the scheme
member. The Pensions Sharing provisions came into force from 1
December 2000 in respect of divorce or annulment proceedings which
commenced after that date. The Pension Sharing provisions are not
compulsory, rather they provide an alternative to the pre-existing
offset or earmarking provisions.
Any matter involving pension earmarking or pension sharing on
divorce or dissolved civil partnership should be referred to the
Pensions Specialist in TG at IHT Edinburgh.
