Some divorcees may lose out on pension benefits if they are not careful, a financial advice firm has warned.
As an unintended consequence of pension reform some divorced people who had a ‘pension earmarking order’ made in their favour could lose out on the money they expect. Such orders can be made as part of a divorcing couple’s financial settlement. They stipulate that one party is entitled to receive a set percentage of their former spouse’s income from any pension they receive following their divorce.
However, pension reforms have given people the option of forgoing an income-based pension and opting to receive a one-off cash lump sum instead. Research from financial service provider Old Mutual Wealth found that six per cent of those eligible to take such action planned on doing so. The firm warned that this could affect the benefits someone with a pension earmarking order receives.
Pensions expert Jon Greer said that a lot of these orders will have been made before the introduction of pension sharing. He added that most of them will have been made to benefit the wife. Therefore it is “important that these women act promptly, especially if their ex-husband is approaching retirement age, to check their earmarked rights are protected”, he warned.
Women in this position need to ensure that “they receive the same benefit if their ex-husband takes all the pension money out as cash instead of as an income”.
Photo by yum9me via Flickr