For Pensions Awareness Week – an example of the pension questions we receive, helping you better understand your pension.
Question:
I have a Pension Sharing Order (PSO) applied to my 75 scheme pension. I thought this would be final but I have heard from a friend that it may continue to impact my pension if I stay in service.
Answer:
In the case of the 75 Scheme pension if the pension is shared after the member has passed their IP point it is assumed that the pension will be reduced from the day it is implemented (transferred). If however you remain in service (and the pension is not put into payment) you are not “losing” or “repaying” the percentage of the pension that was given up. Subsequently, when you do retire, you are expected to repay the amount that your pension would have been reduced by for all the years that it was not in payment because you continued to serve.
To determine the reduction to your pension at the point you do retire (and the pension comes into payment) the full value of the pension, as if you had never shared, is calculated. The pension debit (share given up to your ex-wife when the PSO is applied) is then multiplied by a factor based on your age at retirement divided by a factor based on your age when the pension transferred; and then all inflationary increases between sharing and retirement. This provides a new value to the pension debit and it is that value by which your pension will be reduced.
As we do not know what future inflationary increases will be or pay awards or perhaps how long you may continue to serve and if you will promote it is difficult to predict what effect a PSO will ultimately have on your final pension award.
To be clear your ex-wife does not receive any more than the share that was originally given to her however, you may lose a greater percentage of your pension than that you originally gave up.
Wendy Bandeira, Senior Pension Adviser
