Divorce (pension debits and credits)

Latest updates for Sargeant Remedy

As updated in FPS Bulletin 89 - January 2025 GAD provided the following update:

Update on divorce guidance

In December 2024, GAD issued draft guidance to the Home Office, and are currently engaging with NPCC, LGA, and police and fire scheme administrators on that draft. GAD expects to issue final guidance for divorce cases that commenced on or after 1 October 2023 during February, and for cases that commenced before that date during March.

For divorce cases that commenced before 1 October 2023 (i.e. the calculation date for the initial Cash Equivalent (CE) provided to the court to take into account when making the Pension Sharing Order (PSO) was before 1 October 2023), if benefits are due to come into payment before the divorce guidance is finalised scheme managers should consider the options below so that member can receive payment of their benefits.

Cases where the pension debit member was unprotected and the PSO related only to legacy scheme benefits

Where the pension debit member was unprotected (so transferred to the reformed scheme on 1 April 2015) and the PSO relates to legacy scheme benefits only, there will be no debit applied in respect of remediable service (even if the PDM makes a legacy scheme election). Consequently, in these cases:

• For the pension debit member: The legacy scheme pension debit (related to service before 1 April 2015) will be unaffected by McCloud remedy, and that debit will be applied whether the member makes a legacy scheme election or a reformed scheme election. For example, if the pension debit was calculated to be £1,000 per year at the time of the divorce based on the pre-McCloud 
  remedy benefits, that debit of £1,000 per year should be revalued to retirement and applied regardless of whether the member makes a legacy scheme election or a reformed scheme election: there is no increase to the debit if the member makes a legacy scheme election under McCloud.
• For the pension credit member (PCM): the pension credit will be unaffected by McCloud remedy. The pension credit calculated at the time of the divorce based on the pre-McCloud remedy benefits can be put into payment as usual.

Pension credit cases coming into payment before the divorce guidance is finalised

Where pension credits in respect of divorce cases that commenced before 1 October 2023 are due to come into payment before the divorce guidance is finalised, scheme managers may put the PCM’s benefits into payment based on the pre-McCloud pension credit calculated at the time of the divorce. 

As part of the McCloud remedy, it will be necessary to rework the PSO using the forthcoming divorce guidance. This process might result in an uplift to the PCM’s benefits (although in some cases the PCM’s benefits will be unchanged). This process is outlined in the Home Office’s McCloud / Sargeant remedy: phase two (retrospective) consultation document:
“If it [i.e. the CETV allowing for McCloud remedy] is higher than the CETV originally calculated, a portion of the additional amount in the same proportion as specified in the PSO will be converted to an additional pension credit and awarded to the pension credit member.”

Pension debit cases coming into payment before the divorce guidance is finalised

Where members with a pension debit in respect of a divorce case that commenced before 1 October 2023 are due to retire and receive pension benefits before the divorce guidance is finalised, the scheme manager may use their discretion under regulations pay benefits assuming that the member makes a legacy scheme election in advance of issuing a Remediable Service Statement (RSS). If the scheme manager wants to make use of this discretion to pay benefits, the scheme administrator should provide the details listed below to [email protected]. GAD will then provide guidance on how the debit applies to the member’s benefits, assuming that the member makes a legacy scheme election. When the divorce guidance is finalised, it will still be necessary to 
issue an RSS to the member.

Data to be provided:

• Date initial CE provided to the court (i.e. the CE the court was using in 
  determining the pension sharing order)
• Transfer day (i.e. the effective date of the pension sharing order)
• Legacy scheme (i.e. 1992 scheme or 2006 scheme)
• PSO percentage legacy scheme
• PSO percentage reformed scheme
• McCloud protection status (protected, taper protected, unprotected)
• If taper protected, the taper date

GAD guidance on calculating the Pension Debit Adjustment and Pension Credit on divorce in each of the 1992, 2006 and 2015 schemes. For guidance on calculating divorce CETVs, please click here.

Note that calculations for the following members will be subject to adjustment in line with the GAD note on GMP indexation:

• Males with a date of birth between 6 April 1951 and 5 April 1955
• Females with a date of birth between 6 April 1953 and 5 April 1955