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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