Divorcees who have an ‘Earmarking Order’ in place to split a final salary pension pot belonging to their former husband or wife could find themselves with no financial provision in retirement because of new pension rules. Earmarking Orders previously made were to ensure the divorce settlement was fair if one spouse had built up a greater pension during the marriage.
However, as a result of the pension reforms in April this year a loophole has unintentionally been created meaning that bitter divorcees could cash in their pensions at 55 in order to deprive their former spouse of an income. The former spouse is often totally dependent on this income in retirement.
The reforms allow pensions to be used like a cash machine and as a result the entirety of the pension can be withdrawn as cash. There may be restrictions on withdrawal of the pension as cash if there is an Earmarking Order in place but this would be at the discretion of the company running the pension scheme leaving the former spouse in a vulnerable position. As a result it is imperative divorcees seek advice to protect their income for retirement.
Here at Bromleys we have a specialist Family team that deals with finances on matrimonial breakdown. If you require any assistance on this, please contact: –
Nicholas Clough (nclough@bromleys.co.uk)
Or telephone: 0161 330 6821