In this video, Wills and Tax Specialist Lee Young looks at the different types of LPAs, whether you need one and what to include.
As of 6th April 2022 divorce law has changed drastically, thanks to the Divorce, Dissolution and Separation Act 2020. No-fault divorce is now law.
Therefore, the information in this article may be outdated. Please refer to our dedicated divorce page here for the most up to date information, or call us on 01202 499255.
During the course of the last Budget The Chancellor George Osborne reconsidered the rules relating to pensions. These have now been changed with effect from the beginning of April so that pension holders can possibly take their funds as cash lump sum rather in the form of annuities as was previously required.
Pension companies say that this may lead to people using the new freedoms to treat their retirement funds more like cash machines, withdrawing small amounts as they need alternatively they could be using the pension to obtain a large chunk of cash which might then be used to generate an income by purchasing annuities or other investments.
However, the change appears to have overlooked the intent of pension earmarking orders which were common prior to the year 2000. Under a pension earmarking order the spouse of an individual who had a pension fund would, under court order, receive a credit from the pension holders pension once in payment. When the pension holder achieves the age of 55 under the new regulations the pension holder would be able to withdraw the entire pension as a lump sum thus there would be no monthly payments to satisfy the ex-spouse under the earmarking order.
Family Solicitor Andy Stynes says, "A sensible course of action for that anybody who has a pension earmarking order which was made before 2001 would be to check the order and to obtain legal advice as to what steps could be taken now to protect the pension. If the pension holder withdraws the sum it could deprive the ex-spouse of an income upon which they were relying on during their old age."
As Debbie Kay of Thomas Millard Wealth Management said “When all earmarking orders were drawn up, over 20 years ago, it was not envisaged that the pension could be taken in this way”. She went on to suggest that all divorcees should find out if the earmarking order applies to a “capital sum” as well as pension income. It may be possible for amendments to be made but not once the fund has been emptied and dissipated.
We have offices in Christchurch and the New Forest. Our Family team also cover Bournemouth and Poole. For a free initial chat, please call 01202 499255 and Andy or a member of the team will be happy to discuss any questions that you may have.
