You may not be familiar with the Martin-Dye v Martin-Dye case but it has been a very important one in relation to pensions on divorce.
In the closing statement of that case Lord Justice Thorp said,
“Pensions in payment, being different in kind to other available assets, should have been apportioned by means of a pension sharing order … The arguments in support are self-evident. A pension in payment is no more than a whole life income stream akin to an annuity. It cannot be sold, commuted for cash or offered as security for borrowings. It has no capacity for capital appreciation.”
Clearly where a final salary pension is in payment this remains relevant.
But, as you may know, things are changing. By April 2017, the government has planned for it to be legal to sell your annuity, and the question is:
When this happens will we see mass exodus out of these annuity products?
I’m already having conversations with clients where they have small annuities considering selling out, which makes me think that such an exodus is likely and the question then is: what impact will this have on financial settlements?
If an annuity can be sold could this now be considered a liquid capital asset rather than a “whole life income”?
The short answer is that no one knows yet, but I’m definitely going to be keeping a very close eye on how this develops. What do you think is going to happen? Would love to get your thoughts.
Phil
