The rules around pension sharing in England and Wales set out a clear framework around how pension rights are valued and split at the time of divorce.
It's worth remembering a couple cannot simply agree for part or all of their pension arrangements to be split and transferred to their former spouse or civil partner. This is treated as an unauthorised payment and could mean punitive tax charges.
In England and Wales, a pension sharing order is made by the courts as part of the financial settlement agreed at the point of divorce or dissolution of a civil partnership.
A pension sharing order must:
a) state that pension rights held by one party are to be shared for the benefit of the other;
b) state the percentage of the rights to be shared in this way, or (in Scotland only) the amount to be shared; and
c) identify the pension arrangement(s) which are affected.
In this Technical View article, Sanlam's Julia Peake looks at the important points advisers need to consider on pension sharing, how it can affect the state pension, and whether to share each pension held or treat pensions with more liquid assets differently.
She also covers the benefits that have to be taken into account, how a pension sharing order is implemented and the charges involved.To download Sanlam's Technical View on pension sharing orders, click here