Pension Earmarking Order – More Trouble Ahead?

In 1995*(1) a new animal was created in the world of ancillary relief (that is the financial aspects of a divorce) when dealing with the distribution of pension assets – a pension earmarking order. Prior to that, in reality the only effective alternative when trying to fairly share the assets of a divorcing couple was to offset a pension fund against other assets, say a lump sum or a property. That was not always a feasible option.

No lawyer that I came across seemed to like pension earmarking orders.

I know I was concerned about how difficult they were to draft and also ensure that they were future proof. I avoided them like the plague as did many of my professional brethren – and it seems that instinct was right all those years ago.

Clearly with the advent of pension sharing orders, courtesy of the 1999 Act*(2), pension earmarking orders fell out of fashion and we all breathed a collective sigh of relief. There are however, still circumstances (such events are rapidly dwindling I accept) where earmarking orders may need to be made – but that is another story for another day.

The changes implemented by Gideon Osborne in April 2015*(3) allowed for persons over 55 to raid their own pensions (as opposed to the companies raiding them for a change!) rather than buying an annuity and there has been much hype in the media about pensioners buying Lamborghinis and then living in penury for the rest of their lives.

If you have an earmarking order, then there is a risk that the person with the pension can effectively raid the pension, take off with the wads of cash and you as the poor ex spouse left high and dry with a reduced pension in payment.

Time to check the wording of your final (financial remedy) order if you have an pension earmarking order as part of your financial remedy (ancillary relief) proceedings?


*(1) Introduced under section 166 of the Pensions Act 1995, which inserted sections 25B to 25D of the Matrimonial Causes Act 1973. Earmarking of pensions extended the armoury of the court to allow them to earmark a pensioners (a members) pension rights for the benefit of the former spouse and has applied since 1 July 1996.

*(2) The Welfare Reform and Pensions Act 1999 (WRPA) further amended The Matrimonial Causes Act 1973 by sections 19 and 21 of the WRPA  introducing pension sharing (as well as making some improvements to earmarking). The WRPA received Royal Assent on 11 November 1999 and became a legally enforceable settlement from the 1 December 2000.

*(3) pdf of government document highlighting the changes> warning> very dull reading ! can be found here.