Is your financial settlement at risk from the new pension reforms?

Is your financial settlement at risk from the new pension reforms?

how to protect your pension

The new pension reforms mean that divorcees who have the benefit of a Pension Earmarking Order may lose out. They could discover to their detriment that as an unforeseen consequence of the pension reforms that they do not receive the benefit of their rights under their existing Pension Earmarking Order. These days it is unusual for an Earmarking Order to be made, and these orders are far more common with couples who divorced before the millennium when Pension Share Orders were not available.

Under an Earmarking Order, a share of the pension income is paid to the former spouse when the pension holder (member) retires. There were limitations with an Earmarking Order which caused these orders to become unpopular once Pension Share Orders were made available in December 2000.

The new pension rules mean that members are now free to withdraw their entire pension as cash and not take a pension income.

Consequently there is a real risk if you have the benefit of an Earmarking Order, which pays you a fixed percentage of the pension income, that you could completely lose out if your former partner decided to withdraw the entire pension as cash. Therefore it is vital that you check your financial settlement immediately to see if your rights are protected in the event that your former husband withdrew his pension as cash. This is particularly important if your former husband is approaching the age of 55.

What do you need to do?

You should find out if the wording of the Earmarking Order protects you in this situation. As the old earmarking system would not have accounted for the possibility that a member might one day be allowed unlimited access to their money it is therefore unlikely that the old Earmarking Order will protect your legal position.

What do you do if you are not protected?

If the old order does not protect you, you should take immediate legal advice from a family lawyer experienced in this area, to check whether you can amend the order as it may be possible to make amendments but only before the fund is emptied. Urgent amendments and appropriate undertakings may be potentially sought to protect your position. 

For further advice about family law and check if your own Pension Earmarking Order is at risk, please contact our experienced family solicitor Howard Cohen on 0113 320 5000 or by email