When relationships end
Pension attachment and earmarking orders
Pension earmarking used to be available throughout the UK but is now only available in Scotland. In England, Wales and Northern Ireland earmarking has been replaced by pension attachment orders. A Pension attachment order redirects part or all of the member’s pension benefits to the ex-spouse or civil partner when it comes into payment. Previous pension earmarking orders made in England, Wales and Northern Ireland will still apply at the member’s retirement. This doesn’t provide a clean break, as an on-going link with your ex-spouse or civil partner will remain.
On your divorce, or dissolution of your civil partnership, all of your assets and those of your ex-spouse or partner are taken into account. If you decide to opt for pension attachment/ earmarking order, then when the member starts to draw retirement benefits, part or all of them are paid to your the ex-spouse or partner. The Court instructs your the scheme administrator or pension provider to make these payments to your ex-spouse or partner or vice versa.
In England, Wales or Northern Ireland, these payments can be made from:
- The member’s pension income
- and/ or, the pension commencement lump sum (PCLS)
In Scotland, they can only be made from a:
- pension commencement lump sum (PCLS)
If you’re thinking about choosing the above option, but would like some more guidance about this and other options available to you, our team is here to help. You can find out more about our services and what we can offer those thinking of going through a divorce or dissolution here.
While it's simple to understand, pension earmarking can have some problems:
- If you die before you reach retirement, your ex-spouse or partner (or you)may receive nothing;
- Your ex-spouse or partner (or you) does not receive anything until you start to draw your retirement benefits;
- If you retire early, or stop contributing to pensions, your ex-spouse or partner (or you) may receive less than they expected;
- If you die after you have started drawing your retirement benefits, any income payable to your ex-spouse or partner (or you) also stops; and
- The Courts prefer a ‘clean break’ approach to divorces and the dissolution of civil partnerships. Pension earmarking does not fit with this approach.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.