Earmarking/Attachment orders

The Pensions Act 1995 modified the provisions of the Matrimonial Causes Act 1973 by giving the Courts new powers to take account of the loss of pension rights and to make attachments orders for the benefit of an ex-spouse. Scheme Trustees or Managers could be directed by the Court to divert payments from a member to the member's ex-spouse.

The payments from an attachment order taxed on the pension member before they are passed to the ex-spouse, which means that the payment received tax free.

Attachment, however, has its shortcomings and has not proved popular. The member can delay the commencement of the pension benefits to the detriment of the ex-spouse. If the ex-spouse remarries, the attachment order will lapse in so far as it relates to income, and it may be subject to variation in so far as it relates to a lump sum. Also, benefits might be lost in the event of the member's death before retirement.

Attachment is not a "clean break" solution.