Pension earmarking overview

Pension earmarking, also known as an attachment order, is a divorce settlement arrangement whereby an ex-spouse is entitled to a percentage of the member’s pension benefits once the member begins drawing them. This can include lump sums, income payments, death benefits, or a combination of these.

As part of our Bitesize Technical series, Senior Technical Consultant Joshua Croft looks at how pension earmarking works.

Key insights on pensions earmarking

• The court will specify the ex-spouse’s entitlement as a percentage of the member's pension benefits, and the scheme administrator will ensure the appropriate payments are made when benefits are drawn.
• The member retains full control over the pension fund, including investment decisions and retirement timing. The ex-spouse has no say in these matters.
• The ex-spouse’s benefits depend on the member’s retirement decisions, meaning the arrangement doesn’t provide a clean financial break.
• Courts may impose conditions, such as voiding the attachment order if the ex-spouse remarries.
• Pension earmarking has become less common since the introduction of pension sharing orders, which provide a clean break between parties.
• The introduction of pension freedoms complicates the administration of pension earmarking, due to flexible benefits like UFPLS and flexi-access drawdown. Many orders are outdated and don’t account for these modern pension options, creating challenges in execution.

More Bitesize Technical

Interested in more Bitesize Technical topics? Why not take a chunk out of our 'Pension benefits' series?