When a member of the armed forces reaches retirement age, they receive one of the most generous pensions available in the UK — reflective of the unique sacrifice they have made to their country throughout their career. Here, we look at how armed forces pension schemes work and what happens to them in the event of a divorce.
Armed forces pension scheme explained
All members of the armed forces are enrolled automatically into the Armed Forces Pension Scheme and unlike other public schemes, members pay 0% in contributions each month. The scheme is unfunded and paid by government funding.
The current armed forces pension scheme is known as the 2015 scheme and is based on a career-average revalued earnings (CARE) model.
There are three Armed Forces Pension Schemes (AFPS) for members of the Regular Armed Forces:
- Armed Forces Pension Scheme 75 (AFPS 75)
- Armed Forces Pension Scheme 05 (AFPS 05)
- Armed Forces Pension Scheme 15 (AFPS 15)
Whether or not someone is a member of any of the above schemes depends on when they were enlisted or commissioned as a member of the Regular Armed Forces.
The value of an armed forces pension depends on factors such as length of service, rank held and type of pension scheme. Generally speaking, the longer the period of service and the higher the rank, the greater a pension is likely to be.
War Pension Scheme and compensation for veterans
In addition to armed force pension schemes, if a veteran has suffered injury or illness during service in the UK or abroad (whether in combat or training exercises), they may be eligible for compensation under the War Pension Scheme.
The amount of compensation awarded depends on the severity of the injury or illness and can include a lump sum payment and/or a regular payment to supplement income. The scheme can also provide help with medical treatment, rehabilitation and other expenses related to the injury or illness.
Divorce and pensions
During divorce, all pensions will be taken into account, regardless of whether they were accumulated pre-marriage or post-separation.
Generally, pension assets should be shared equally, though there are legal arguments that a spouse or civil partner can make to depart from that starting point. For example, if a case relates to a short marriage and one spouse (or civil partner) made considerable pre-marital contributions to an armed forces pension, they may seek to ring fence those contributions. Each case is fact-specific, so it is important to take legal advice on your unique circumstances.
There are different ways to deal with pension sharing on divorce, but a common method is where a percentage of one spouse’s (or civil partner’s) pension fund will be transferred out of their existing pension scheme and into a pension in the other spouse’s (or civil partner’s) name.
To start this process, the Cash Equivalent Transfer Value (CETV) of your pension must be obtained. This is stated on your annual pension statement. The CETV can be misleading in terms of the annual income that the pension will produce in retirement — this is often the case with defined benefit schemes. Therefore, to achieve equality of income on retirement, it is not as simple as adding up the parties’ respective pension CETVs and dividing the total figure in half. It is therefore common to instruct a pension on divorce expert — often a pension actuary — to produce a pension report and advise on pension sharing options to achieve a particular objective.
The treatment of pension assets in divorce cases is a complex issue. For specialist advice regarding pension orders, offsetting or any other family law issues, get in touch with our wider family law team.
