Stand-out Q – pension debit…


SAT, 24 MAR 2018

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An individual who has scheme specific lump sum protection gets divorced and as part of the settlement there is a pension sharing order. How does the pension debit affect their protected lump sum?


Unlike a partial transfer which would result in the protected pension commencement lump sum being reduced, this is not the case with a pension debit. Where an individual’s rights under a protected pension scheme are reduced due to the transfer out of a pension debit the individual’s protected lump sum rights remain unchanged. This is because a transfer involves the moving of the responsibility to pay the member the benefits to which they are entitled from their accrued pension rights from one scheme to another. A pension debit is the amount by which the value of the member’s pension rights are reduced with a corresponding pension credit to the ex-spouse’s or former civil partner’s pension rights, which are increased and to which they become entitled. As the member has no right to benefits in relation to a pension credit, the transfer out of a pension debit is not a transfer for pension tax purposes.

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