Divorced people may have to head back to court over their pensions thanks to a lack of clarity in the recent reforms, a leading wealth management business has warned.
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.
An earmarking order provides the ex-spouse with a fixed percentage of the pension income in retirement.
However, since last month, the member of the pension scheme no longer needs to take their pension as an income and can take it all out as a lump sum instead, which might lead to a legal wrangle over splitting the lump sum.
Jon Greer, pensions expert at Old Mutual Wealth, 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.”
Similar warnings have been issued to farmers.
Farmers with pensions invested in their own farming assets are being warned to take extra precautions against divorce after pension rule changes.
With the pension changes, these farmers could be forced to sell their farm assets if a divorce resulted in an order to share the pension with their spouse and the spouse then wanted to withdraw money.
In both scenarios, people are urged to seek legal advice.