In this article family lawyer Deborah Cahill explains how Military Early Departure Payments are treated when a couple decide to divorce.
What are Early Departure Payments?
Early Departure Payments (EDPs) are payments made to members of the Armed Forces who pass the early departure payment qualification point. The payments are made up of a tax-free lump sum and monthly payments. These payments are made between leaving service and when the member reaches their pension age. Intended to act as an incentive to encourage personnel to serve for at least 20 years, these payments enable the recipient to resettle and provide compensation for service leavers starting a second career later in life.
Who Qualifies for an EDP?
A member of the Armed Forces who has reached the age of 40 and served at least 20 years or, subject to other qualifications, has received an ill health discharge from the Armed Forces, may be entitled to an EDP.
Are they part of the (AFPS) forces pension?
Although EDPs are calculated on the recipient’s final pensionable earnings, they do not form part of the recipient’s pension and are not pensions. EDPs will usually cease when the recipient retires and receives their AFPS pensions. The recipient may then be entitled to another lump sum plus their monthly pension. EDPs are not included in the cash equivalent transfer value of the member’s pension. As the EDP is not a pension, it is not a resource with a cash valuation.
How are EDPs treated in divorce proceedings?
Both parties are required to make full and frank disclosure of their financial positions which will include EDPs. They are disclosable within any divorce proceedings as income and/or capital available to the recipient and will be relevant to any financial settlement because they are available to meet the recipient’s and, potentially, the spouse’s needs. Although EDPs could not be shared between the parties by way of an order, the Court can make lump-sum payment orders or spousal maintenance orders in favour of the non-receiving spouse. These orders would take into account the lump sum and monthly payments received by way of EDPs.
What can be done to achieve a fair settlement where EDPs are in payment?
It is important to obtain appropriate expert advice when dealing with pension and other benefits for Armed Forces personnel. Due to the complicated pension arrangements, it is likely to be necessary to instruct a Pensions Actuary as Lawyers do not have the necessary actuarial expertise to calculate the effects of pension sharing orders on the parties. The Pension Actuary can then advise on the effect of the EDPs upon the possible financial settlement. Usually a Pension Actuary with expertise in military pensions will be instructed jointly by both spouses solicitors to advise. The report on the effects of any potential orders can then assist Lawyers in negotiating a settlement.
Seek advice from specialist family lawyers
Specialists Family Lawyers are accustomed to dealing with military pensions and associated benefits. We work closely with experienced Pension Actuaries to provide expert reports and have experience in helping our clients understand these. Our lawyers have experience in supporting those in the Armed Forces and their spouses through divorce and family law issues. If you would like to discuss Early Departure Payments and divorce please do get in touch.