Pension Sharing again - Form P

Form P Pension Inquiry Form :http://www.hmcourts-service.gov.uk/courtfinder/forms/form_p_1205.pdf
Section B Questions 4 and 5 - to be completed by the pension scheme:
4. (a) Does the person responsible for the pension arrangement offer scheme membership to the person entitled to a pension credit?
(b) If Yes, does this depend on Employer and/or trustee approval?
5. If the answer to 4(a) is Yes, what benefits are available to the person with the pension credit?

Q5 Apart from money purchase benefits what other types of benefits are available to ex-spouses offered membership of a final salary/defined benefit scheme?

omit stray colon at start of pdf address

I'll have you know my colon is not stray..

Mine's a rescue colon

Maggie: It won’t be much of a comfort to you much to know this but the information on for P is notoriously unreliable, particularly on the subject of scheme membership for pension credit members. To make matters worse, the attitude of the schemes trustees to change, between the date that form P is completed and any pension sharing order is made.

To make matters worse, if the relevant question is answered YES that is not really the end of the story. Many Defined Benefit (DB) schemes are now closed to new members and in this case, the YES may mean that the pension credit member will be offered membership in the replacement scheme, which may be a Defined Contribution (DC) scheme. Some schemes offer pension credit membership on different terms – for example dependents pensions may be available under the original scheme but not provided for the pension credit member. We have even seen situations where for boring and technical reasons, a pension sharing order has resulted in the sum of the two parts – the residual pension for the pension debit member and the new pension for the pension credit member – is worth less than the original pension benefit. As I have said before, there are numerous pitfalls for the unwary.

Don’t even start me on the issues where the pension credit is by transfer into another scheme....

All this adds up to why the input of a parasite, sorry expert, is essential. But then I would say that………
… wouldn’t I?

Hi Maggie
Pete certainly has the technical knowledge from what I have seen of his posts so far, and when you’re dealing with “uniformed pension schemes” i.e. police armed forces etc then this really helps. Your question Q5 asks about other benefits of Scheme membership these are often at “Trustee’s discretion” which makes them very hard to pin your hat on as benefits, but one that could be extremely valuable is Ill health early retirement as this could make a significant difference to the amount of pension that the new member may receive if they were to satisfy the criteria. If a client took a pension credit and invested into their own pension plan then the best they could hope for here is an impaired life annuity. This is a special annuity rate often personally calculated for that individual client because their life expectancy is less than the average so the annuity provider is willing to pay out a higher amount as they expect to pay it for a shorter period of time. In severe Terminally Ill cases then there is the possibility of a total payout of the pension fund (less a tax payment to the Inland Revenue …. Of course!)
Bottom-line is that most Final Salary Schemes are short on cash so if they do offer shadow membership, like Pete says, the devil is in the detail about how their benefits differ from main scheme members.
It is definitely an area where we earn our keep in reviewing the options and advising a suitable course through the mire!

Hi Peter -
Could I ask you about sharing a pension in a Defined Benefit Scheme closed to new members ?
If a DB scheme is closed to new members does that make it impossible for an ex-spouse to become a member on anything other than a money purchase basis ?
Form P asks about "winding down" but not about closure to new members/future accruals?
Should that information be disclosed to the prospective pension sharer before agreeing the percentage?