Divorce, earmarking, FAS/PPF and taxation.

theancientone

Hi...has anyone, please, got experience of how compensation payments from the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS), and which are subject to an earmarking order, are taxed when respectively paid to the man and woman who got divorced?
Many thanks for any help.

jamesd

No and that's obscure enough that giving the PPF a call to get their initial thoughts on how the pension itself is handled seems like a good idea. Once the pension income is know, the taxation should be normal for whatever that level of income is, just normal pension PAYE calculations I expect.

theancientone

It seems that when, as part of a divorce, pensions are 'split' by virtue of an earmarking order (as opposed to a pension sharing order), the pensions are still regarded as belonging to the partner in whose name the pensions were created, hence monthly payments to both ex partners are taxed as income of the partner in whose name the pensions were created. This has disadvantages for both ex partners.
However, compensation payments from the Pension Protection Fund and the Financial Assistance Scheme are not pension payments, and so I wondered if such payments might be taxed differently from if they were pension payments from the original pension schemes.
I have asked the Financial Assistance Scheme for guidance but wondered, in the meantime, whether anyone had any pertinent experience or knowledge.