Pension splitting

We are increasingly a nation of divorcees. The Government's projections show that 11 per cent of men and 12 per cent of women will have pulled the plug on their marriages by 2010.

However, until the Pensions Act 1995, there was nothing in the law to stipulate that a divorced person should be obliged to dip into a pension to support a former spouse in old age.

The last three years have seen the introduction of pension "earmarking", so that pension assets must be included in the divorce calculations. The difficulty with this arrangement is that when there are not sufficient liquid investments for the "ex" to receive immediate compensation in lieu, he or she has no option but to stay in touch with the former partner until his or her pension matures.

The Government's proposal is pension "splitting", whereby a chunk of the pension fund, to be decided by the court in the light of the rest of the settlement, is transferred into a separate pot and put under the ex-partner's control.

Things are not happening as fast as many divorcing couples would wish. The latest report on the proposed Pension Sharing Act recommends that implementation is delayed until April 2001. Concerns include the fact that as proposals for splitting stand, topping up a depleted pension after divorce will be limited by a contribution ceiling.