Pension changes bring uncertainty on divorce

Nicola Furmston

In the 2014 budget the government made massive changes to pensions and many of these are due to take effect in April 2015. This will alter the landscape for the treatment of pensions in divorce cases, as what has to happen with a spouse’s pension pot on retirement will no longer be fixed.

At the moment a pension pot must be converted into an annuity for the payment of a monthly income to the pension holder. It follows that any share of pension allocated to a spouse must also become an annuity and the calculation of how much income each of the divorcing couple will have, whilst not simple, is, at least, an obvious method of calculation.

From April the way forward will not be so obvious. Pension holders may be able to withdraw lump sums of cash or invest in other types of asset. Ensuring that there is a level playing field where eventual monthly income is concerned is going to be tricky, as both parties may make different investment/withdrawal decisions.

These new rules will apply to defined contribution schemes (ie those taken out with commercial pension providers) and fund-holding private sector schemes. Members of unfunded public sector schemes will remain subject to the current rules of their schemes.

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Nicola Furmston is a solicitor specialising in the family field at Barker Gotelee, Solicitors in Ipswich.