IMPLEMENTING A PENSION SHARING ORDER

The parties to a divorce will either agree or be directed by the court that a particular pension share will be issued.  This share will be based on information that is already out of date and it will be many months, if not years, before it can be put into place.  Everyone therefore, must understand that no matter how accurate the figures are the eventual outcome will always be different to the advantage and/or disadvantage of either or both parties.  A Pension Sharing Order does not take effect until it has been served on the Pension Scheme along with a copy of the Decree Absolute.  They can be served separately, but until the Pension Scheme receives both then it cannot act. 

Having received a Pension Sharing Order the Pension Scheme will then write to both parties informing them of what has happened and ask for certain information.  Until that information is provided, which can also require the payment of fees, the process to put the order into effect does not start.  The Pension Scheme will inform the spouse receiving the share, known as a pension credit, how they discharge of their liability to the credit.  They may insist that the pension credit stays in the Pension Scheme, this being the case for all Unfunded Public Sector Schemes like the NHS and Teachers Pension or they may insist that it is moved out of the scheme.  This is common for all Personal Pensions.  There is a third choice that leaves the spouse to decide themselves how they would like to deal with the pension share.  This is the situation for Local Government Pension Schemes. 

Having received all the information necessary, and if appropriate the payment of fees, and again if appropriate the instruction as to what should happen to the pension share, an implementation date is created.  The Pension Scheme must implement the Pension Sharing Order, which must be expressed as a percentage, within four months of the implementation date.  The implementation date is not the date of the divorce; it is not the date the Pension Scheme receives the Pension Sharing Order and Decree Absolute, it is the date defined by them once they have the necessary information to enable them to implement a pension share. 

Within the four-month period the Pension Scheme will completely revalue the benefits.  Those benefits will include future contributions and salary in-service up to a date 21 days after receiving the Decree Absolute and Pension Sharing Order.  If agreement was made many months earlier to a particular pension share then it can be seen already that the final figure is going to move purely because of extra benefits being accrued.  Add to this the extreme volatility in investment markets and changes in age then it can be seen why figures can change very dramatically.  Having created the implementation date, and having undertaken a new valuation, the pension provider then has to implement the Pension Sharing Order by creating the pension credit in the way agreed or dictated.  A recent Pension Ombudsman determination in the name of Boughton clearly identifies that Pension Schemes cannot merely delay implementing a Pension Sharing Order until the allowed four months period from the creation of the implementation date.  If an implementation date has been created then it is necessary for the Pension Scheme to implement the order as quickly as possible.