L&G adds feature so trustees do not have to alter rules for divorced couples
Legal & General has added to its Section 32 Buy Out policy, allowing it to accept pensions credits from ex-spouses. The change also includes any safeguarded rights in respect of contracted out benefits.
Andy Agar, pensions marketing director at Legal & General, said the added feature is designed for pension scheme trustees where their scheme rules do not cater for pension entitlements to be held by anyone other than the current or former employee.
He said many trustees did not want to alter the rules of their schemes to allow them to hold the policies of ex-spouses, and added that the new arrangements would allow spouses to arrange for the pension to be transferred without trustees having to change scheme rules.
The arrangements for former spouses who were awarded a sharing order by a court were amended in 1999 so they could split the pension before maturity and turn it into two separate schemes.
On divorce, the court will issue a pension sharing order, which will specify a percentage or amount of benefit to be deducted from the pension scheme member.
The amount by which the member's benefit is reduced is called the pensions debit. A corresponding amount, known as the pensions credit, is transferred to provide retirement benefits for the ex-spouse.
Agar said: 'If the trustees have not heard from the ex-spouse within the specified three-month deadline, they can automatically invest the ex-spouse's pension credit in a default investment option.'
Agar reported that the new arrangements would allow policyholders to maintain the benefits of an occupational scheme with a policy in their own name by using a buy-out plan as a default option. He claimed that this set up was unique to the Section 32 market and that other providers will have to change their products if they are to be able to accept former spouses in
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