By Alison Barnes
Public Sector pensions… recent changes and implications in divorce…..
April 2015 is going to see some huge changes to public sector pension schemes which will mean many members will have “split benefits” with different entitlements at differing retirement ages. Some members will find themselves in a tapering period of relief dependant on their level of service.
On 01 April 2014 the Local Government Pension Scheme (LGPS) switched to being a Career Average Revalue Earnings (CARE) Scheme, the new 2015 police pension scheme is a career average scheme. When the changes were made to the LGPS there was little by way of advance notice and much of the technical information did not emerge before the CARE scheme was implemented.
At the moment, if a pension sharing order is made within divorce proceedings, then those receiving the pension credit would have their “share” of the original member’s scheme transferred into a separate “pot” with the same provider but held in their sole name. Pension credit members currently receive broadly the same benefits as the original member. However, the pension credit member in the uniformed services scheme cannot drawn down the full benefits from their pension credit until they reach 60 years of age.
Although the position is currently uncertain, it is anticipated that other Public Sector schemes, including the police pension scheme, will follow the precedents set by the LGPS in respect of how pension sharing is dealt with on divorce, irrespective of the original member’s benefits. If that is to be the case then this will have implications for pension sharing orders post 01 April 2015.
If, as anticipated, public sector schemes follow the LGPS, then recipients of pension credits will no longer be able to draw down the benefits from their pension credit until they reach State Pension Age.
A pension sharing order does not come into effect until the later of 28 days after the order is made or the date of Decree Absolute. It is at this point the amount of the pension share (expressed as a percentage within the court order) is calculated. The pension scheme then has 4 months to implement the pension sharing order. We are therefore now entering a period where there is much uncertainty.
We cannot therefore say how a pension share is to be implemented post 01 April 2015. We have spoken to the West Yorkshire Police Pension provider, Mouchel, who are still awaiting guidelines from the government actuarial department as to how pension shares are to be implemented. Whilst it is expected that pension shares ordered in respect of members with entirely protected benefits will likely be implemented in the same terms as they are now, this is by no means guaranteed. It is also unclear as to how pension credits will be implemented in respect members with split benefits, or those moving entirely into the new scheme.
We therefore need to proceed with caution. This is especially relevant where we are relying on a current pension valuation but the amount of pension share is unlikely to be calculated, or indeed implemented, before 01 April 2015.
If you have any questions about pensions, we at Barnes Family Law we offer a free initial consultation in confidence. Call us on 01274 861096 to enquire about an appointment or email firstname.lastname@example.org