IN times when all the financial and economic news seems to be bad, it makes a refreshing change to learn of a positive development that may be of practical benefit to large numbers of people.

If you are divorced, aged between 50 and 60 and have been awarded a share of your former spouse’s pension, known as a Pension Credit, you may now be able to gain access to a part of it from which you could not previously benefit before reaching 60.

This is due to a change introduced in the Pensions Act 2008 to the status of benefits previously known as Safeguarded Rights, which often form a significant part of pension benefits awarded as part of the divorce settlement to the former spouse of a pension scheme member, under a Pension Sharing Order.

Many employer-sponsored pension schemes contracted their members out of the earnings-related part of the State Pension Scheme, known as Serps (now superseded by the State Second Pension). This resulted in a reduction in both the employer’s and employee’s National Insurance Contributions (NIC) but required that the savings in NIC be paid into the pension scheme.

Employees who were not members of an employersponsored pension scheme, or whose employer’s scheme did not contract them out of Serps, could opt out individually via an Appropriate Personal Pension Scheme.

In these circumstances, they continued to pay the full rate of NIC, with the Government paying a rebate of part of them to the Personal Pension provider after the end of the tax year.

Safeguarded Rights was the term applied to the part of a Pension Credit deemed to have arisen from the investment of NIC savings or rebates.

Until April 6 this year, government regulations stipulated that the benefits from Safeguarded Rights could not be drawn before the age of 60 and must be used solely to provide a pension income.

The change introduced in the Pensions Act 2008 means that Safeguarded Rights will now be treated in the same way as other pension benefits, in that they can be taken from age 50 and up to 25 per cent of the Safeguarded Rights fund can be taken as a tax-free lump sum, if required, with the remaining 75 per cent being used to provide a pension income.

The withdrawal of the Safeguarded Rights rule does not just apply to divorces taking place after April 6, as it is retrospective to any existing arrangement.

It should, however, be noted that the facility to take a lump sum applies only to funds from which benefits have not already been taken.

People who reached 60 and took their Safeguarded Rights pension under the old rules will not be able to reopen them and take a lump sum from them now.

Anyone at the lower end of the eligible age range who thinks they may benefit from the rule change should act soon to seek independent financial advice, as the minimum age at which any pension benefits can be taken will increase to 55 from April 6 next year.

Consequently, to delay now could mean having to wait for several years for the opportunity to claim benefits which are not taken by that date.

Many people will have already taken their tax-free lump sum and income from the non-Safeguarded Rights part of their Pension Credit while previously having to defer access to the Safeguarded Rights portion until they reach the age of 60.

The opportunity to take Safeguarded Rights earlier than anticipated may provide a substantial financial lifeline to some people in these difficult financial circumstances.

It will not, however, be appropriate for everyone and it is imperative that advice be sought to ensure that any action taken is appropriate to the individual’s circumstances, and does not jeopardise any entitlement to other benefits.

However, this may be a good time to check your paperwork to see if you were awarded a pension share on divorce, and explore these new options open to you if you have an element of Safeguarded Rights within your Pension Credit.

The subject of pensions and divorce is quite complex and professional advice should always be taken from a suitably-qualified advis0r specialising in that area.

■ Nigel Bourke is managing director of Stockton-based Mercury Wealth Management Ltd. Telephone: 01642 670307, mercurywealth.co.uk