(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)
Pension sharing on divorce (see
PSI3.5.4) has no effect from a
tax approval perspective on the lump sum benefit that can be paid
if an employee dies in service. The limits in
PSI11.2.1- 4 apply as normal. As the
death in service benefits would be covered by term life assurance
policies or the funding for the member’s actual retirement
benefits or a mixture of both (see
PSI20.1.44), there would not
be any particular capital set aside just for the provision of the
lump sum death benefit. As such, it is unlikely that a pension
sharing on divorce order would be placed upon a prospective death
in service lump sum benefit. Instead, an earmarking order could be
placed on the prospective lump sum benefit requiring some or all of
the lump sum to be paid to the member’s ex-spouse should the
member subsequently die in service.
