Pensions: pension scheme benefits: divorce or dissolved civil partnership
Since the 1970s Courts have had to take into account the value of a person’s pension rights in divorce settlements.
This can be done in the following ways.
- Pension sharing - the pension funds can be split at the time of the divorce to provide separate pension funds for each party. This can apply to proceedings issued on and after 1 December 2000 and provides a clean break option.
- Pension earmarking - when a pension comes into payment, a portion of it can be paid to the other party. This can apply to proceedings issued on and after 1 July 1996.
- Pension offsetting - the value of the pension rights is offset against another asset such as the matrimonial home
These provisions also apply to civil partners (IHTM11032) after 5 December 2005
Each method has advantages and disadvantages and you may see any option although pension sharing is becoming more popular.
In general, there are unlikely to be situations where the arrangement made on divorce or dissolved civil partnership results in an IHT charge.
If you come across a situation where there could be an IHT charge and pension earmarking or pension sharing on divorce or dissolved civil partnership is involved you should refer the file to Technical.