Divorce changes will benefit women

PENSIONS

BY NIC CICUTTI

and JANE SUITER

The House of Lords is not always been associated with progressive legislation. But this week, its members were given advance notice of a change that, assuming it is adopted by the Government, is likely to benefit up to 200,000 women a year.

The Government announced that legislation will be enacted to allow the formal inclusion of a partner's pension in future divorce settlements in England and Wales. Similar provisions already apply in Scotland.

Changes will be brought both to the Matrimonial Causes Act and to the Pensions Bill now working its way through Parliament. It is also proposed that ways of calculating the amounts to be apportioned will be published by the Government at a later stage. But details of what the Government intends remain unknown at this stage.

Women hoping for immediate relief from the problem of what to do about their pensions in the event of divorce should not hold their breath. In Scotland, where the courts are entitled to consider both partners' pensions as part of a divorcing couple's total assets, it has not always proved easy to resolve matters.

Pensions are broadly calculated by reference to their capital value between the date of marriage to the date of divorce. Actuaries are used to working out solutions to issues such as retirement age options, which affect the pension paid or the lump sum element payable to the person who retires.

Until now, the only way division of the pension spoils could be considered was if the remainder of the couple's assets was equal to or greater than the pension, usually a man's, that should be divided.

Clean-break settlements can be arrived at whereby the woman receives cash, or the house, in return for the pension staying with the man. However, problems start if other assets are worth less.

Duncan Howorth, managing director of Abbey National Benefit Consultants, said: "It has been known for a man to go into debt in order to pay the divorced wife a greater lump sum cash settlement and keep the pension.

"In England and Wales even now, it is possible to arrive at a similar settlement, usually when lawyers for both sides agree to include a pension in the divorce settlement. But a husband cannot be legally compelled to do so."

Exactly how the changes will be made is vital to Caroline Fletcher. She was married for 20 years until her divorce and now lives on £42 per week income support. During the marriage, Mrs Fletcher worked as a nurse to supplement the family income and support their son Sean, now a student. When she thought about joining the nurses pension scheme, it was agreed her husband's pension would be more than enough for the two of them in retirement.

"I bought furniture and other things for the house. Now I don't have anything and I have to sell the house. I think the law has let me down," she said.

The Pensions Management Institute, which represents experts in the profession, has proposed that both divorcees are given an equal share of the total funds to keep until pensionable age, or to transfer into a separate fund.

The issue still to be resolved by the Government is how to deal with the fact that trustees may not always be willing to go to the extra trouble and expense of creating two pensions out of an original one.

The problem becomes worse in the case of many unfunded pensions, such as teachers', nurses' or civil servants' schemes.

Roddy Kohn, an adviser at Bristol-based Kohn Cougar, warned against complacency: "No matter what happens, the sensible thing for women to do is to make provision for themselves."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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