Commentary on Sections Part 1 – State Pension Section 13: Shared state pension on divorce etcSection 14: Pension sharing: reduction in the sharer’s section 4 pensionSection 15: Pension sharing: amendmentsSchedule 8: Pension sharing: appropriate weekly rate under section 13Schedule 9: Pension sharing: up-rating state pension under section 13Schedule 10: Pension sharing: appropriate weekly reduction under section 14Schedule 11: Pension sharing: amendments
Since December 2000, financial settlements on divorce have been able to provide for one party to a divorce to split his or her current or prospective entitlement to additional pension with his or her former spouse. The rules on pension sharing have applied to civil partners since December 2005.
Where a pension sharing order is made, a court will order a percentage split or an amount to be transferred. The apportioned benefits are known as “pension debits” and “pension credits”, created under the Welfare Reform and Pensions (Northern Ireland) Order 1999. The former spouse or civil partner (“the transferor”) will have his or her prospective additional pension entitlement reduced by the value of a pension debit and the beneficiary (“the transferee”) will gain entitlement to a pension credit that is equal to the amount of the debit. Pension sharing can be applied to current or prospective entitlement to additional pension or to shared additional pension from a previous divorce.
The Act does not affect the validity of a pension sharing order made against a person in the new state pension scheme before the Act comes into operation.
Although the new state pension will not comprise any additional pension, the Act does allow for pension sharing of the new state pension in certain limited cases.
It will still be possible in the future to make a pension sharing order against a person who has a transitional rate pension under section 4 that exceeds the full rate of the state pension. But the pension sharing order can only relate to the amount of that excess.
If a pension sharing order has been made against someone in the new state pension scheme, the rate of his or her state pension under section 4 may be reduced (see section 14).
A person in the new state pension scheme may also benefit from a pension sharing order made before the start date of the new state pension scheme, or made against a person in the current retirement pension scheme. In this case the person will be entitled to a state pension under section 13 based on the pension sharing credit. This will be paid in addition to any state pension the person is entitled to, based on his or her own National Insurance record. Calculating entitlement in this way means that a person is able to benefit from qualifying years obtained under the new state pension scheme notwithstanding the award of a state pension credit.
Schedule 8 sets out the rules for calculating the appropriate weekly rate where a pension sharing order has been made.
Schedule 9 provides for increases of shared state pension (state pension credit) once payment has started, as follows:
	if a person’s total state pension including the state pension credit is equal to or less than the full rate of state pension the amount of the state pension credit will be up-rated in line with earnings in the same way as the full rate of state pension is up-rated;
	if a person’s state pension is less than the full rate of the state pension but exceeds the full rate when the state pension credit is taken into consideration, the amount of the state pension credit up to the full rate of state pension will be increased in line with earnings (in the same way as the full rate of state pension is up-rated), and the excess of the state pension credit above the full rate will be increased in line with prices (in the same way as the excess of any transitional rate of pension under section 4 is up-rated); or
	if a person’s state pension alone is equal to or higher than the full state pension, then any state pension credit will be increased in line with prices (in the same way as the excess of any transitional rate of pension under section 4 is up-rated).
Schedule 10 explains how a person’s appropriate weekly deduction is calculated if a sharing order has been issued.
Schedule 11 amends existing legislation to take into account the introduction of the sharing of the new state pension. Among other things, it makes provision for those reaching pensionable age under the current scheme to receive shared additional pension in relation to an order made against someone in the new state pension scheme.