Settlement To Protect Divorcees Over Pension Income

The first time an order could be made against a spouse’s pension in divorce, it was not possible to carve out a percentage of the pension fund which would then stand alone in the receiving party’s sole name. What happened was a proportion of the pension members lump sum and resulting pension income could be ‘ear marked’ for the other spouse. These were called Ear Marking Orders and then re-badged as Pension Attachment Orders. 

In normal circumstances, the Solicitor would insist that the person with the pension gave an Undertaking to the Court (a solemn promise) to take the maximum lump sum possible. This was, of course, limited to 25%. The person with the benefit of the order then got their required percentage of that and any resultant pension income. The Court could not order when a person actually took the pension income, however, the Solicitor would insist on an undertaking confirming the date when the person with the pension would “retire” and receive a pension income so the receiving party had a definite date. 

A potential difficulty not foreseen at the time would be the unusual case of there being no insistence on taking a Capital Lump Sum Order supported by an undertaking. That left it open as to what, if any, lump sum the receiving party would receive. However, they would at least know they were getting their percentage of income. 

However, with the new pensions freedom the person with the pension fund may opt to take it all as a lump sum and, if that a share of the lump sum was not provided for in the Pension Attachment Order then the receiving party is never going to get any pension income, (there would be no fund left!) 

As a result, there are new proposals being set out to insist on pension schemes notifying the potential receiving ex-spouse that the Scheme Member is seeking to transfer out or cash in their pension fund so that they are at least on notice of that fact. 

As Pension Attachment Orders were in effect a deferred lump sum and maintenance orders they are, of course, variable. It is possible to make an application to the Court to remedy the position which I would imagine would have a strong prospect of success given the Applicant would only be seeking, in cash terms, what was originally envisaged anyway! 

If you have a Pension Attachment Order make an appointment for a free initial meeting with either myself or my colleague, Marie Whittaker, and we can review the risk for you.