Will getting a divorce affect my NHS Pension?

Karen Watson-Brown a dental specialist financial adviser at Wesleyan Financial Services, discusses how getting a divorce could impact your NHS pension.

According to data from the National Office of Statistics, marriage and divorce is on the rise in people over 65. However, during a divorce, it appears that there is a degree of uncertainty regarding pensions. A recent survey by Wesleyan Financial Services found that one third of the participants were unsure of what would happen to their pension during a divorce, and a further 16% wrongly think that their partner is not entitled to any of their pension wealth.

Understanding what could happen to your NHS and/or private pension during a divorce may not be the most comfortable topic but it is an important consideration. Depending on the circumstances, a pension is generally considered a joint asset – this means that it is subject to division in divorce.

Despite the fact that pensions can be highly valuable assets, they are often overlooked during divorce and the focus is directed towards other things such as property, children and even pets all remain at the forefront in terms of importance.

The division of assets

Typically, during divorce proceedings both parties establish what they have in terms of assets – if neither party can agree on the division of assets and mediation proves unsuccessful, their solicitors can ask a court to make a financial order to determine how the assets should be divided on their behalf. As part of the application, both parties may be asked to complete a financial statement or Form E as it is more commonly known – this form asks for detailed information regarding all assets, including all pension plans and schemes.

Each divorce is different. While some couples agree amicably on who will get what during a divorce, for others it may be more complicated. It may be the case that one spouse has stayed at home to raise the children and has been unable to build a pension to provide for their future because they’ve been supporting the other spouse who has been earning and feel that it is grossly unfair. This is often when the value of pensions is taken into account during a divorce and related financial settlements, and where a Pension Sharing Order (PSO) may be issued.

What is a PSO?

A PSO is?a formal agreement to divide your pension assets at the time of divorce. The court decides what percentage of a pension should be shared to the former spouse. A PSO can be issued to both NHS pension scheme members and holders of private pensions.

How could a PSO affect your NHS pension?

A PSO can be legally served on the NHS pension scheme, specifying that a percentage of the value of the member’s benefits must be used to create a pension benefit for the former spouse, or civil partner. This will be based on a cash equivalent transfer value – the capitalised value of a member’s pension benefits under the scheme. This is essentially a calculation of what the pension would convert to as a pot of money when that member reaches normal retirement age.

It would then be divided according to the court order between the two parties, it will then be allocated to the recipient as a pension credit. They will not have access to it until they reach retirement age.

For more information on your NHS pension visit: https://www.wesleyan.co.uk/pensions-and-retirement/nhs-pension?utm_source=linkedin&utm_medium=social-organic&utm_campaign=newsletter