Mr Cayless continues: “Once the pension sharing order is implemented, each spouse will have their own independent pension rights.
“The pension sharing provisions apply to almost all types of private pensions and to active, deferred and pensioner members.”
He adds: “The only significant exceptions to this in practice are the state pension and pensions received as a dependant.”
A pension attachment order, which replaced earmarking in England, Wales and Northern Ireland, is when pension benefits can be used to pay either maintenance or a capital sum from a pension scheme to the ex-spouse on the member’s behalf.
The key difference to note between attachment and earmarking orders is that in attachment payments can be made from the member’s pension income and/ or the pension commencement lump sum, but with earmarking in Scotland, they can only be made from a pension commencement lump sum.
Mr Cayless says: “[With attachment and earmarking] the ex-spouse will not have his or her own independent pension rights – there is no clean break – [and] his or her rights under an earmarking/attachment order only becomes payable when the entitlement arises under the pension scheme in respect of the member.”
He notes that payments will stop automatically on the death of the member.
“In practice, earmarking orders against pension payments are only likely to be made where the court deems that a clean break is not possible,” he adds.
Additionally, he says there is also pension offsetting, which involves each party retaining their pension assets but offsetting these against other matrimonial assets.
“For example, if one person has a large pension pot, the other may receive the house, assuming it has similar value,” says Mr Cayless.
He says: “[But] the difficulty with offsetting is that it can be hard to compare values of different assets.
“It will be particularly difficult to accurately value pension benefits for this purpose if a party has a final salary or other salary-related pension benefits.”
He adds: “As an alternative, a couple could come to an informal financial agreement which they then ask the court to approve and turn into a court order.
“Such an arrangement would not have a direct impact on any pension benefits.”
victoria.ticha@ft.com
