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Divorcees with pension earmarking orders may need to act to protect benefits

Pension reforms may have unintended consequence for divorcees

According to Old Mutual Wealth, an unintended consequence of the pension reforms is that any divorcee with a pension earmarking order may need to act fast to protect their benefits. Any earmarking order which provides the ex-spouse with a fixed percentage of the pension income in retirement should be checked to ensure benefits are protected now that the member no longer needs to take their pension as an income and can instead take all the cash out as a lump sum.

Old Mutual Wealth, the wealth management business, notes that before pension sharing was available, a number of people would have set up pension earmarking orders. These people now need to check how the new pension freedoms impact them.

If a divorcee has a pension earmarking order which pays them a fixed percentage of the pension income, they should check immediately to see if their rights are protected if the member decides to withdraw all their pension as cash and not take a pension income. If the member takes all the pension as a cash lump sum the ex-spouse may not receive their correct entitlement. If the wording on the earmarking order does not protect them from this, it is recommended that they should seek advice to ascertain whether they can make an amendment to the order.

Jon Greer, pensions expert, said:

"A number of people would have set up pension earmarking when it first became possible, around 20 years ago, and the majority of these orders would have been for the benefit of the ex-wife. It is important that these women act promptly, especially if their ex-husband is approaching retirement age, to check their earmarked rights are protected. They need to ensure that where they have a right to a percentage of the retirement income they receive the same benefit if their ex-husband takes all the pension money out as cash instead of as an income."

For an article stating that the pension reforms may put farm assets at risk in the event of divorce, please click here.

10/5/15