What is a Pension Credit?
A pension credit is a share of your ex-spouse or civil partner’s Local Government Pension Scheme (LGPS) benefits following a divorce or dissolution. A court of law decides the share you will receive as part of a Pension Sharing Order. The share awarded to you is known as a pension credit, this is your own pension in the scheme and is separate from your ex-partner’s benefits. Your ex-partner has no access to your pension credit.
Your pension credit will be adjusted each year in line with the cost of living. Remarriage or entering a new civil partnership does not affect your pension credit. If you divorce or your civil partnership is dissolved again, your pension credit could be subject to another Pension Sharing Order.
When will my pension credit be paid?
Pre – 1 April 2014 leaver
If the Pension Sharing Order took effect before 1 April 2014, or your ex-spouse or civil partner stopped paying into the scheme before this date, your pension credit will be paid without early retirement reductions at age 65 (Normal Pension Age).
You can choose to take your pension credit between age 55 and 65, but early payment will reduce your benefits.
Your pension credit will be adjusted each year in line with the cost of living.
Post – 31 March 2014 leaver
If your ex-spouse or civil partner paid into the LGPS on or after 1 April 2014 and the Pension Sharing Order took effect after this date, your pension credit will be paid without early retirement reductions at your Normal Pension Age. This is the same as your State Pension Age.
You can choose to take your pension credit at any age from 55 to 75, but early payment will reduce your benefits. If you take it later than your Normal Pension Age, your benefits will be increased.
Your pension credit will be adjusted each year in line with the cost of living.
The Government has announced the earliest age that you can take your pension will increase from age 55 to 57 from 6 April 2028.
Lump sum
Pension Sharing Order took effect before 1 April 2014 or your ex-spouse or civil partner left the LGPS before 1 April 2014
If your ex-spouse or civil partner joined the LGPS before 1 April 2008 and had not received a lump sum before the Pension Sharing Order took effect, you may receive a tax-free lump sum.
If they joined after 1 April 2008, you will not receive a lump sum and cannot swap your pension for one.
Pension sharing order took effect after 31 March 2014 and your ex-spouse or civil partner was paying into the LGPS after 31 March 2014
You may have the option of swapping some of your annual pension for a tax-free lump sum. This will not be possible if your ex-spouse or civil partner was already receiving their pension before the Pension Sharing Order took effect and they had swapped part of it for a lump sum.
Death benefits
There is no spouse, partner or children’s pension attached to a pension credit, but there may be a death grant payable.
If your ex-spouse or civil partner left the LGPS before 1 April 2014
If you die before the pension credit has been paid to you, a death grant of three year’s pension will be payable. This will include any cost of living increases due since the pension sharing order took effect.
If you die within five years of the pension credit being paid to you, the balance of five years of pension payments will be paid as a lump sum death grant. There will be an adjustment to this figure if you swapped pension for lump sum when you took the pension credit.
If your ex-spouse or civil partner was paying into the LGPS after 31 March 2014
If you die before the pension credit has been paid to you, a death grant of five year’s pension will be payable. This will include any cost of living increases due since the pension sharing order took effect.
If you die within five years of the pension credit being paid to you, the balance of five years of pension payments will be paid as a lump sum death grant. There will be an adjustment to this figure if you swapped pension for lump sum when you took the pension credit.
You can check and update your nominations easily by logging in or registering for My Pension Online. The North Yorkshire Pension Fund (NYPF) has absolute discretion over who to pay your death grant to and will use your nomination as a guide to your wishes.
Transfers
You may transfer your pension credit to another qualifying pension scheme up to 12 months before your Normal Pension Age. Independent financial advice may be required.
Please note: The NYPF will not accept a pension credit transfer into the scheme.