Family lawyers are warning the Budget pension freedoms will complicate the way assets are split between divorcing couples.
Currently, courts assess non-pension capital, pension wealth and income when deciding how to share assets, but the Government’s reforms mean pensions can be taken as cash or used to buy an annuity or drawdown, or a combination of all three.
Stephens Scown partner Jo Stone says: “Those categories of wealth were quite distinct, but now there is a blurring between capital and pensions.
“The reforms open up the possibility of different permutations. When you know the only thing you can do with a pension is share it, you can achieve some certainty. Now they are blurred, it adds a layer of complexity. For instance, you could say we’ll share non-pension assets unequally because the member could dip into their fund if they want. It gives the court greater flexibility but makes it more difficult to predict what a judge is likely to do.”
Lawyers say the reforms could also impact ‘offsetting’, a common method of giving a non-member spouse a lump sum discounted because of the illiquidity of pensions in payment.
Blacks partner Paul Lancaster says: “I think there’s less of an argument for discounting – where people said their pension was all tied up in an annuity and so should be discounted as a trade off – as pensions become more flexible.”