The treatment of a scheme is different for funded or unfunded schemes and whether if it is DC or DB.

Funded DC schemes:

• The courts will award a percentage of the pension to the ex-spouse
• The ex-spouse can move it to their own pension scheme; or
• The original scheme can, but doesn’t have to, offer the ex-spouse membership to the scheme

Funded DB schemes:

• The percentage is based on the CETV on the date of the sharing order
• The option of a transfer value must be offered and membership to the scheme does not need to be offered.
• The scheme may impose restrictive rules on the benefits such as age the benefits can be taken or penalties if the benefits are taken before the schemes NRA.

Unfunded Schemes:

• An example is the Civil Service Pension Scheme
• It is the opposite to a funded DB scheme, they must offer membership and don’t have to offer a transfer value.

In a DB scheme the sharing order can be expressed as the number of years’ service within the scheme, IE 20 years in the DB scheme with a 30% pension sharing order meaning that ex-spouse would get a pension credit of 6 years.

Advantages to the member:

• they potentially lose less value than if offset or earmarking orders had been used;
• it provides immediate settlement and a clean break; and
• there are no income tax implications for the member, so a lower gross value can be given

Advantages to the ex-spouse:

• benefits cannot be forfeited in the event of either party’s death;
• there is no risk on remarriage or cohabitation; and
• it provides immediate settlement and a clean

Impact on the LTA:

Pension sharing order effected pre A Day – the ex-spouse could have applied for an increase in their LTA to offset the pension credit. A pension debit for the member was ignored.

Pension sharing order effected post A Day – The pension credit will be tested against the LTA upon crystalisation, but if it has already been crystalised then the ex-spouse can claim an enhancement factor. For a pension debit the pension sharing will not count towards the member’s LTA but if they have primary protection this will be reduced or even lost.