Pensions  

DWP changes divorce rules on state pension sharing

DWP changes divorce rules on state pension sharing

Advisers with clients who divorce after 6 April will find that their state pension will be divided up under a new regime, the Department for Work & Pensions has warned.

The new state pension will be introduced for those reaching state pension age on or after 6 April, and the DWP has introduced a transitional arrangement for those who have built up National Insurance contributions under the old system.

An information sheet aimed at advisers published by the DWP said that couples who start divorce proceedings on or after 6 April will be able to claim each other’s protected payment.

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This is the excess amount above the new state pension level – currently set at £155.65 – that someone will receive if they have high levels of non-contracted-out additional state pension under the outgoing system.

The DWP said: “The full rate of the new state pension will be £155.65. It follows that there is less state pension to share under the new arrangements because around £36 a week of what was additional state pension would no longer be shareable as it will be consolidated into the new state pension.

“In addition, any excess over that amount will be paid as a protected payment, and will be revalued by prices rather than by earnings.”

Those who start divorce proceedings before 6 April will be able to claim each other’s additional state pension, as is currently the case, regardless of when the pension sharing order takes effect or that the person whose rights are being shared reaches state pension age in the new regime.

The DWP said: “In the new system, the process for obtaining valuations from DWP is similar to what happens now.

“DWP will provide the cash equivalent value of the protected payment, as well as the weekly amount. However, the way in which the DWP will implement a share order has changed.”

Under the new rules, pension-sharing orders in England, Wales and Scotland will be required to specify a percentage of the weekly amount of protected payment and not its cash-equivalent value.

The person subject to a debit will have their protected payment reduced by an amount that will exactly equal the amount paid to the person benefiting from it. The amount will never be different unlike in the current system, the DWP has said.

Adviser view

David Trenner, technical director of Glasgow-based Intelligent Pension, said: “If you go back 20 years when, frequently, pensions were ignored in divorce to where we are now, I don’t think we need fundamental change to the way pensions are treated in divorce.

“The most important thing is getting the message to solicitors that actually they don’t know much about pensions.”

Email: damian.fantato@ft.com