When a couple divorces or a civil partnership ends in Scotland, the court can order one partner to pay a capital sum to the other. Section 12A of the Family Law (Scotland) Act 1985 explains how that payment can come from pension lump sums — either during life or after death.

This section helps ensure a fair financial settlement when pensions are involved.

🧾 What Section 12 Covers

This section applies when:

• A court orders one party to pay a capital sum to the other after separation.
• The person paying (called the liable person) has pension rights that may include a lump sum payment.
• That lump sum could be:
  • 💰 Payable directly to them.
  • ⚰️ Payable after their death (e.g. a death-in-service benefit).

🏛️ What Can the Court Do?

1. 📩 Redirect a Pension Lump Sum

If a lump sum is due to the liable person during life, the court can:

• Order the pension provider to pay all or part of that lump sum directly to the other spouse or civil partner

2. ⚰️ Deal with Death Benefits

If the lump sum is payable on death, the court can:

• 🧑‍⚖️ Order the pension provider to pay it to the ex-spouse or ex-partner instead of the default beneficiary.
• ✍️ Require the liable person to nominate their ex as the beneficiary.
• 📜 Override default arrangements if necessary.

This gives the court power to ensure the intended financial provision survives the relationship – literally.

✅ Legal Safeguards

• Any lump sum paid under this kind of order:
  • ✅ Counts as fulfilling the pension scheme’s obligation.
  • ✅ Counts as part of the liable person’s court-ordered financial settlement.
• If circumstances change (e.g. the money is paid another way), the court can recall or adjust the pension-related order.

🔁 Transfers Between Pension Schemes

If the liable person transfers their pension to another provider:

• 🔄 The original order automatically applies to the new pension provider.
• 🧾 The new provider must be notified of the court Order.

This prevents people from trying to avoid pension-related orders by moving schemes.

🛡️ What Happens if the Pension Scheme Enters the PPF?

If the pension scheme enters the Pension Protection Fund (PPF) due to insolvency:

• 🧩 The order may be paused or modified.
• 🔁 The court can redirect the order to apply to PPF compensation instead of the original lump sum.

🧠 Why It Matters in Divorce

This law ensures that:

• Capital sum orders aren’t ignored just because the money is tied up in pensions.
• The non-pension-holder gets a fair share.
• Death benefits and lump sums don’t vanish from financial settlement plans.

💬 Expert Advice for Pension-Related Settlements

Pensions are often one of the most valuable assets in a divorce – but also one of the most complex.

👩‍⚖️ At XK Family Law Solicitors, we help clients navigate:

• Pension sharing and earmarking.
• Capital Sum Payments.
• Court orders involving death-in-service benefits.

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