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Divorcees get the go-ahead to rebuild retirement funds

Divorcees who share their pensions will be able to rebuild their retirement saving when the simplified pension regime comes into operation next year.

Divorcees who are forced to share pensions with former partners will have greater flexibility in their retirement saving because the amount of the pension share will count against the recipient’s allowance rather than the donor’s lifetime allowance.

Under the current regime, only in very limited circumstances can donors rebuild their full rights if they have been cut as a result of a pension share arrangement ord-ered by a court in divorce proceedings. The Government’s rethink on pension sharing and divorce rules could benefit hundreds of thousands of people. Current rules restrict the way that individuals can rebuild their pensions after a pension-splitting divorce settlement.

Abbey for Intermediaries head of pensions and retirement Mike Brown says the new rules apply to pension-sharing arrangements granted both before and after A-Day although rights cannot be restored if benefits are taken before A-Day.

The recipient under a pre-A-Day pension share arrangement can also register the additional rights with a DWP registration form within three years of A-Day to increase their allowance.

Brown says: “The vast majority of divorcees can rebuild their pension rights, whereas previously this only applied in a small number of cases. Many people in that situation may not have considered the implications of A-Day on their divorce settlements so it is vital that IFAs are able to give the right guidance at the right time to ensure their clients’ interests are protected as far as possible.”

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