This section sets out how a pension sharing order/agreement relating to the state scheme will work. The basic state retirement pension will not be subject to pension sharing, but the rights to the additional pension (AP) element of a Category A retirement pension will be. An AP may be payable to an employee who has contributed to the State Earnings Related Pension Scheme (SERPS), that is, in any tax year, paid standard rate Class 1 National Insurance contributions. The pension deriving from a state scheme pension credit will be called the “shared additional pension”.
Subsection (1) provides that on the taking effect of the pension order/agreement, the “member” of SERPS is subject to a state scheme debit, and the former spouse becomes entitled to a state scheme credit of the same amount.
Subsection (2) provides that where the order/agreement is expressed in terms of a percentage, the amount of the debit and credit is that percentage of the cash equivalent of the member’s state scheme rights immediately before the day on which the order/agreement takes effect.
Subsection (3) provides that where the order/agreement is expressed in monetary terms (that is in Scotland) the credit and debit will be the amount stated or, if less, the cash equivalent mentioned above.
Subsection (4): we intend that regulations made under this section will contain a table to be applied when calculating a cash equivalent. This will be set by the Government Actuary and based on such actuarial factors as the age of the person whose rights are being valued.
Subsection (5): for the purposes of sharing the state pension, only those tax years before that in which the order/agreement takes effect will be taken into account.
Commentary Supplementary Chapter II – Sharing of State Scheme Rights Section 49: Creation of state scheme pension debits and credits