This is continued from the previous post Divorce and the impact on retirement benefits...
When does payment to the ex-spouse occur?
Until recently, the non member ex-spouse had to wait until the benefit accrued to the member before the non-member could receive the benefit awarded in a divorce order. This meant that the ex-spouse enjoyed no growth on the amount and the effect of inflation wiped out the benefit.
This also had a tax problem which held the member spouse responsible for paying the tax on the benefit payable to the ex-spouse. The member then could attempt to recover the tax payable by the ex-spouse which as you can imagine caused huge problems
Thank heavens, this has now changed, legislation now allows for the "clean break principle". Meaning that all divorce orders, including those granted before 13th September 2007 are entitled to receive payment of the awarded benefit immediately. The tax is also treated differently depending on the date of divorce.
