First, you will likely want to know what earmarking has to do with pensions. A good starting point! Pension earmarking is a choice available upon divorce or dissolution of your civil partnership. Along with the rest of your finances, your pension is seen as an asset. This means solicitors should explore it as part of a divorce and dissolution settlement.
Earmarking can only be applied if ordered by a UK court under the Matrimonial Causes Act. Consequently, it cannot be part of an out of court settlement.
If your pension has been earmarked as part of a divorce or dissolution, then part of your retirement benefits will be paid to your ex-partner.
What monies can be earmarked?
Earmarking applies to your pension, the lump sum and any death grant. The court has powers to instruct the Teacher Pension Scheme to pay all or part of these funds to your former partner.
The parts of your pension that cannot be earmarked are those that already subject to an earmarking order. Also, if you are subject to premature retirement due to a decision by your employer, the mandatory element provided by the employer cannot be earmarked. If your employer agrees to a discretionary payment, this cannot be earmarked either.
What information will you be required to provide?
Your solicitor or the court may explore the possibilities of earmarking as part of your settlement. You will be expected to provide a copy of the draft order and pension attachment annex for approval by the Teacher Pension Scheme. There will be a cost for services relating to earmarking, which you should make your solicitor and the court aware of – a cost you will be invoiced for. Once the invoice is paid, your ex-partner will be expected to complete identification documents for security purposes.
When will the order cease?
The earmarking order will cease if you or your partner dies. However, if you die before retiring, part of your death grant will be paid to your former partner. The order will also cease if your former partner remarries or enters a civil partnership concerning your pension. However, this does not impact the earmarked lump sum, which will still be paid to your ex-partner.
Be aware that legislation concerning pensions is fast-moving. You should check with your solicitor and/ or an independent financial advisor to see if this applies to you.
The content in this article was correct on 15th January 2020. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor. See how we can help you.