Pension schemes will have to pay for the implementation of the pension sharing on divorce rules if t...
Pension schemes will have to pay for the implementation of the pension sharing on divorce rules if the DSS's most recent plans on the issue are implemented.
The industry has until 14 February to respond to the 122 pages of draft regulations released in December by the DSS, Revenue and Lord Chancellor's department.
The main points of the regulations cover the charging aspects of pension sharing and an outline of the role pension scheme trustees will be expected to fulfill.
Steven Cameron, manager of pensions development at Scottish Equitable, said: "The record keeping that will be involved for final salary will be very complex. However, money purchase scheme also have difficulties. It is still not clear how, under a money purchase scheme, you allow for testing against Inland Revenue maximum benefits. Divorcing members will still need to include the part that was given to their ex-spouses when testing against the maximum benefits unless the members earn less than a quarter of the earnings cap which is currently £22,650pa."
Under the proposals schemes will have to provide a valuation of the individual's pension fund within three months of being asked by the divorcing member or else no later than six weeks prior to the divorce hearing.
Once the scheme gets word it must share the ownership of the fund, it must implement this within 21 days or else provide the scheme member with a detailed explanation as to why it cannot be completed in time.
Once the regulations are passed, pension schemes will have to bear the initial costs of making amendments to trustee deeds and other expenses such as record keeping. This would involve the employer getting advice on how to implement the new rules as well as possible legal costs, Cameron said.
When the procedures are in place, the ongoing costs of sharing the pension will fall to the individual member who is getting divorced. Another new point raised in the regulations is the sharing of an annuity. If the divorcing member has already entered retirement at the time the pension is to be shared then the ex-spouse is entitled to a share of the income from the annuity.
Final regulations are expected in March and the Government plans to implement these by the end of 2000.
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