Synopsis: This section looks at how divorce is dealt with when schemes are entering or are in the PPF
Last Reviewed: Friday, June 19, 2015
The Pensions Act 2008 made provision to enable rights to pension compensation under the PPF to be treated in the same way as other pension benefits where a divorce is involved. During the spring/summer 2010 the DWP consulted on draft regulations to extend the pension sharing and earmarking provisions to members of the PPF. In March 2011 the Government issued its consultation response to that. The following three sets of Regulations, all effective from 6 April 2011, were then issued to implement this.
- The Pension Protection Fund (Pensions on Divorce etc: Charges) Regulations 2011 – SI 2011/726
- The Pension Protection Fund (Pension Compensation Sharing and Attachment on Divorce etc) Regulations 2011 – SI 2011/731
- The Divorce and Dissolution etc. (Pension Protection Fund) Regulations 2011- SI 2011/780
The PPF has also issued a short guidance note ‘Compensation and divorce’, which provides guidance on these new regulations.
The changes in these regulations align schemes that have transferred to the PPF with pension schemes outside the PPF. This will mean that courts will have similar mechanisms to deal with divorce (e.g. sharing and earmarking) where an individual is a member of the PPF to those where an individual was a member of a scheme outside the PPF.
There is, however, one major difference regarding the pension sharing provisions. Any pension sharing order made against the benefits of a member of the PPF can only provide for the ex-spouse’s/former civil partner’s pension credit benefits to be provided under the PPF. The ex-spouse/former civil partner will not, therefore have the option of transferring the pension credit to another scheme. The pension sharing provisions broadly mirror those applicable to members of schemes outside the PPF.
The following points are, however, worthy of note with regard to the provision of the pension credit rights under the PPF:
- The date at which the ex-spouse/former civil partner will first be able to draw their pension credit rights under the PPF will normally mirror the normal pension age of the member. The ex-spouse/former civil partner may also be eligible to take early retirement from age 55.
- Where an ex-spouse’s/former civil partner’s compensation credit is not in payment, it will be revalued in line with the CPI (subject to a cap of 2.5%) from the transfer day (the day the pension compensation sharing order takes effect) up until the day before the pension commences.
- Where any part of the ex-spouse’s/former civil partner’s compensation is derived from the member’s pensionable service on or after 6 April 1997, that part of the compensation will increase each year in line with inflation, subject to a maximum of 2.5 %.
- PPF compensation can only be shared for members of schemes that have transferred into the PPF and where the divorce/nullity of marriage occurs on or after 6 April 2011.
The following special PPF versions of Forms P, P1 and P2 apply:
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