Pension reforms loophole: Ex-wives may lose out in rule change over shared pot

New rules allowing people to withdraw entire pension funds have created a loophole that can override agreements to share benefits built up by breadwinner. Divorced savers who have agreed to split a pension pot with an estranged spouse in retirement can now keep the entirety by cashing it in under new rules, it has emerged. Many couples who divorced before the millennium signed agreements to share the income benefits built up by the main breadwinner. But the new rules can override these so-called a�?earmarking ordersa�?.
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. Until last Aprila��s radical pension reforms, most savers were obliged to turn their funds into a regular retirement income by buying an annuity. Earmarking orders were designed to ensure a fair deal if one spouse had built up a bigger pension than the other during married life.
Depriving an ex-spouse of a share of retirement income could make full withdrawals popular among bitter divorcees. When earmarking orders were drawn up, over 20 years ago, it was not envisaged that the pension could be taken this way.

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GREG POGONOWSKI
www.yourmoney-matters.net