Pensions can be a tricky area to deal with during a divorce, often because they are not properly understood. There are many different types of pensions and one of the most challenging, and interesting, ones to deal with are military pensions, whether serving in the Army, Navy or Royal Air Force.
You will need a divorce lawyer who understands and can empathise with you about the emotions you will be feeling during your divorce, while also having knowledge and experience of helping military couples like you through the process. We have this experience, and here we highlight some of the key facts you need to be aware of before starting divorce proceedings.
What is a Military Pension?
A military pension is very different to a state, public sector (teacher, NHS or civil service) or private occupational pension. In order to ascertain a true value of your financial and property assets, which will be taken into consideration during your divorce proceedings, you will need to obtain a Cash Equivalent Value (CEV) of your pension. The CEV will depend on which military pension you have:
With this pension, a former member of the military with 34 years of continuous service is eligible to receive their pension at the age of 55. An additional lump-sum of typically three times the individual’s annual pension income is also paid tax-free. Those who do not have the continuous service element will receive a smaller pension when they reach retirement age. Members who joined this scheme between 1975 and 5 April 2005 were transferred over the new scheme, AFPS05, in 2005.
Most elements of this pension scheme remain the same as the AFPS75, other than the amount that military personnel receive when they have less than 34 years of service. This scheme also introduced new amounts for those with less than 18 years service and for those who leave between the ages of 40 and 55. Any members of this plan who were not within ten years of the pension age as of 1 April 2012 were automatically transferred onto AFPS15.
Over time it is planned that this scheme will replace the former two schemes with a variety of new benefits and opt-out options. This scheme increased the retirement age from 55 to 60 as well as removed to tax-free lump sum offered in the original AFPS75 plan.
What are your options when dividing your assets under a Military Pension?
Once your CEV has been established, the Court will then use this information to determine how your assets will be split with your spouse upon divorce or separation. There are three ways pensions can be dealt with during a divorce:
Offsetting is straightforward whereby one party keeps the pension in return for the other keeping an alternative asset, usually the home.
Pension Attachment Orders
Pension attachment orders are rarely used and are becoming more and more unpopular, but they are something which should be considered in cases dealing with armed forces pensions which predate 2015. A share of the pension holder’s pension is allocated to the spouse and when the pension is drawn down the spouse will receive a percentage of the lump sum and the monthly income. The pension holder has control of when it is drawn down and what amount is taken as a lump sum which is why these types of orders are not popular. If the pension holder dies, the pension can be lost. Normally a pension attachment order would be set up so that if the owner died before the pension was drawn down, the death in service benefits are paid to the spouse.
Pension Sharing Orders
Pension sharing orders are by far the most common way of dealing with pensions. A pension sharing order can only be implemented after the decree absolute has been pronounced in divorce proceedings. It has the effect that a percentage of the pension is transferred to the spouse who then has control of their share of the pension; i.e. it can be drawn down based on their retirement age and they can choose the amount of their lump sum. Pension sharing of armed forces pensions means the pension has to remain within the armed forces scheme and cannot be added to.
Which option is most suitable for you will depend on your individual situation, the length of your marriage and separation, the circumstances that have led to your divorce and what is most important to you; whether you require capital now or a pension at a later date. We can offer you specialist advice as to which option is the most appropriate for you.
What is different about an armed forces pension?
For those serving in the military an Early Departure Payment (EDP) may be available. Members of the armed forces who have served 18 – 20 years plus (depending on which pension scheme they are in) are entitled to an EDP. The EDP is a lump sum and monthly income from the date they leave the forces until they reach retirement age. For members of the older armed forces scheme (AFP05) this is based on a percentage of the pension they have accrued. Therefore, making a pension sharing order can reduce the EDP which has an immediate impact on the assets.
Another major point to be aware of with armed forces pensions is that the CEV is often thought to be much lower than the CEV of other pensions in the private sector because of the value of the benefits the armed forces pensions provides. As such it can be dangerous to rely on the CEV for offsetting purposes and this is why it is important to go to a lawyer who knows about the characteristics of an armed forces pension scheme.
There is a lot to be considered when dividing an armed forces pension upon divorce, and you will benefit by coming to us in the following ways:
- We are offering all serving military personnel a 50% discount on your initial appointment. During this time we will discuss with you your individual circumstances and agree a plan that puts your needs first.
- You will benefit from our years of experience not only handling divorce proceedings for military personnel but also other areas such as pension arrangements, family mediation and children arrangements.
- Our other departments offer you access to first-rate residential conveyancing, Wills, probate and financial advice, putting all your affairs in order within one firm.
For more information about divorce for military personnel you can visit the government website here or to book your appointment you can contact us on 023 8071 7431 or email firstname.lastname@example.org.