UK - Scheme members could be forced to share up to half of their future pension entitlements with spouses they have divorced, lawyers warn.The warning follows the Appeal Court battle between Arsenal footballer Ray Parlour and his former wife, Karen.
The High Court had ordered Parlour to pay his former wife £250,000 a year maintenance and a lump sum of £250,000. She was also awarded the £1m family home in Hornchurch and a holiday home in Norfolk.
However, Mrs Parlour has had her divorce settlement increased by the Court of Appeal after arguing that as she saved his career from alcoholism, she should be entitled to 50% of his future earnings.
Mrs Parlour won the case but accepted a 37% share of his future earnings over the next four years due to the relatively short time the couple spent together.
Presently, only pensions that have been accrued to-date are considered in divorce proceedings.
However, Pinsents partner Robin Ellison (pictured) warned that as the courts have accepted the principle of a 50:50 split of future earnings, members could lose half of their future pensions upon divorce.
Ellison said: “While the pensions angle has not yet been considered by the courts, the principle has clearly been established with the Parlour case. “If it is applied to pensions, it will change the division of assets.”
He added that for members on average incomes, the Parlour case could lead to judges ruling their accrued and future pension entitlement should be used to fund divorce settlements.
“As pensions are one of the few things that do not affect day-to-day living expenses, the courts might say ‘you need £25,000 a year to live on, there’s money coming into the scheme from his employer, let’s use that’.
“So it may be that you could use future pension rights to pay off future expenses, when there isn’t any money.”
Simmons & Simmons partner Monica Ma agreed.
“I can see this happening as the problem with divorce is that very often there is not enough money to go around.
“So any way to deal with that – in what the courts consider to be a fair and equitable way – is a possibility.”
Paul Budgen is set to join financial technology and auto-enrolment (AE) firm Smart Pension as director of business development.
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