Most readers will know that since 6th April 2016 it has been possible to cash in Money Purchase Pensions at age 55. Only 25% of the funds will be drawn cash free which may deter some from cashing in the whole amount. For others it will be tempting to take the lot.

There is some concern that these pension changes might be used to frustrate the effect of Pension Attachment Orders, previously known as Earmarking Orders made in divorce proceedings.

Under the terms of a Pension Attachment Order a percentage of the lump sum and/or the monthly pension income is paid to a former spouse. There would normally be provision for the spouse entitled to the pension to take the maximum or minimum lump sum under the terms of scheme depending on which were being attached.

There will be pre 2016 Attachment Orders made when the amount of the pension income which could be taken as a lump sum would be fairly certain. Indeed, the order may require the party entitled to the pension to commute the maximum or minimum amount possible of the income to a lump sum. At the time that would have been limited by the terms of the particular pension.

Now that all of the pension can be encashed an Order that attached the monthly income for the former spouse could be frustrated if their ex decided to take all of the money out of the scheme by lump sum leaving no monthly pension to be attached.

Unlike Pension Sharing Orders, Pension Attachment Orders can be varied and this might offer a solution to beneficiaries of attachment or earmarking orders.

Anyone who thinks they have a Pension Attachment Order or a Pension Earmarking Order is advised to check the terms of the Order, find out the pension provider’s interpretation of the Order in respect of the new changes and take legal advice.

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