Divorce Advice: Is Your Pension Income Protected?
Following the new pension reforms, some divorcees that have the right to a pension income from their ex-spouse might need to re-think their existing plans to protect themselves from being cut-off from their agreed retirement income.
Emerging risk through pension reforms
One of the best things about the new slew of reforms implemented earlier this year following the Budget 2014 is that there are more opportunities for savers to withdraw their pensions as and when they like.
For example, a pensioner does not need to take it as a monthly income, and can withdraw any amount as a lump sum, as long as they are over the age of 55.
This new-found flexibility, according to the Conservatives, provides hard-working people the opportunity to make the most of their retirement, and to have the lifestyles they deserve.
However, many have questioned whether there are enough safeguards in place to prevent people making risky financial decisions.
One emerging consequence of this flexibility could be that ex-wives might lose out on their bread-winning spouse’s pension pot, despite previous agreements made before the new laws.
Many couples who divorced before the millennium signed so-called “earmarking” agreements. These would ensure that they both would receive income benefits generated by the main breadwinner.
However, the new pension rules allow said breadwinner to withdraw their funds for their sole use, creating a potentially dangerous loophole that could leave the ex-spouse with nothing in retirement, despite any previously held earmarking agreement.
According to Jon Greer, pensions expert at Old Mutual Wealth, “The majority of these orders would have been for the benefit of the ex-wife, and an unintended consequence of the pension reforms is that any divorcees with such an arrangement may need to act fast to protect their benefits.”
Is your earmarking protected?
Greer has discovered that ex-spouses may not receive the money they are entitled to if their agreements are out-dated, or conceived before the millennium.
‘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’.
At GPFM, our Hertfordshire financial advisors are experienced in delivering divorcees personalised advice on how they can secure their financial futures.
Through our expert advice, we can help you to receive the same benefit as your ex-husband, regardless of whether they decide to receive their pension as an income or as a lump sum.
For ultimate peace of mind, contact one of our friendly and professional Hertford financial advisors today.