PSI7.1.20 - Increases of Pensions in Payment: General – Pension Sharing on Divorce

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Where a pension debit must be taken into account (see PSI6.5.89 and PSI7.1.19), the pension in payment can be increased to

• the maximum approvable had the pension sharing not occurred (see PSI7.1.1)

less

• the pension equivalent of the pension debit.

Where the pension sharing on divorce order occurred before the member’s pension commenced, the pension debit is calculated in accordance with

PSI6.5.95-6 - retirement at normal retirement date

PSI9.1.13 – retirement after normal retirement date

PSI10.1.33 – retirement before normal retirement date.

Calculating the pension debit will normally entail a calculation at the time of the divorce whereby the value of the cash reduction to the member’s cash equivalent transfer value, as required by the pension sharing order, is converted into an equivalent deferred pension for the member whose benefits were reduced. The notional deferred pension equivalent is then revalued between the date of the divorce and the date the member takes benefits. Where a pension in payment is subject to pension sharing on divorce order, the pension debit will be equivalent to the reduction that occurs to the member’s pension immediately after the implementation of the sharing order.