Inheritance tax: Key tax implications could give you a ‘smaller pension pot’ | Personal Finance | Finance

Earmarking – This is almost never used, but an order is placed against the corresponding amount of pension allocated to the divorced spouse at retirement age.

Offset – “When people treat pension as the only asset a person has, other assets of the same or similar value are allocated to others. While this is a straightforward solution, it may not work for everyone, as a divorced person may lose valuable retirement benefits in the long run.”

Pension sharing – “where the pension is divided into two pots between spouses or civil partners. This is the same even if both continue in the NHS scheme. The pension is split and each person has their own ‘pot’.”

“This way, each person directs their pension the way they want, and they don’t have to rely on their ex to do things the right way.

“In fact, if the original pension increases against the lifetime allowance currently set at £1,073,100 until 2026 – or if it could in the future – both partners could benefit from separation. This may not have been possible before the pension.”

read more: State Pension payment date changes take place in December – when will you be paid?

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