Most of the draft legislation for the new pension sharing on divorce provisions has now been publish...
Most of the draft legislation for the new pension sharing on divorce provisions has now been published. Pension sharing will be available to divorcing couples who start their proceedings after the effective date of the new legislation, which is expected to be the end of the year.
A pension sharing order will be effected in one of the following ways: a court order made in England, Wales, Scotland or Northern Ireland; a qualifying agreement made by the couple which can be made on or after the dissolution of the marriage; or an order for financial relief made in England, Wales, Scotland or Northern Ireland in respect of an overseas divorce; such an order cannot be made where the court has jurisdiction solely by virtue of a matrimonial home.
A pension sharing order or agreement cannot be made where there is already a pension sharing order on the pension arrangement in respect of the same marriage, or an earmarking or attachment order in respect of any marriage. An earmarking order cannot be made where a sharing order already exists on an arrangement in respect of the same marriage.
Those responsible for the pension arrangement - the managers of the scheme, the insurer or the annuity provider - must provide certain information to the member, his or her spouse and the court in connection with divorce proceedings. There are set time scales for providing the information and fines imposed by Opra for missing deadlines.
The draft regulations set out what charges may be made for pension sharing by the person responsible for an arrangement. These include: the cost of providing the cash equivalent quote which reveals how much is available for sharing; any VAT; ongoing charges if the former spouse becomes a member of the member's scheme; the cost of implementing an earmarking order; and the cost of sharing the benefits.
The charges must be reasonable and limited to the cost of implementing the pension share, and the divorcing couple must be given the right to pay the charges up-front. Unless the sharing order or agreement states how any charges are to be apportioned, they fall to the member.
Once a sharing order or agreement is received, it must be implemented within four months. The implementation period can be delayed until the charges have been paid, providing this is made clear on the schedule of charges.
For sharing to take place, pension 'debits' and 'credits' are created. The part of the member's rights to be shared becomes subject to a pension debit. The former spouse becomes entitled to a pension credit of an equivalent amount.
The amount to be shared will be the relevant percentage of the cash equivalent to all the rights shareable up to the date the court order or agreement takes effect. In respect of an active member of an occupational pension scheme, it will be the cash equivalent of the shareable rights assuming he or she left service immediately before the sharing order or agreement takes effect.
The draft regulations provide that the method used to calculate the cash equivalent should be broadly the same as used for calculating transfer values.
The former spouse may, with their consent, be made a scheme member of a funded occupational pension scheme or a personal pension. Regulations detail the circumstances in which the scheme can make them a member without consent where they have failed to provide details of how they want their pension credit applied.
The pension credit may be transferred to another qualifying arrangement. The scheme can make an external transfer without the former spouse's consent in certain circumstances. A qualifying arrangement is an occupational or personal pension scheme, annuity contract, insurance policy or an overseas arrangement which meets prescribed conditions.
For unfunded public service schemes an external transfer can be offered only when the scheme is closed and another public service scheme will give the former spouse appropriate rights.
An unfunded private sector scheme (UURBS) may offer scheme membership. It may choose to offer an external transfer if another scheme is willing to accept the transfer and the former spouse consents. An external transfer may be made without consent in certain circumstances.
When the member's annuity is already in payment, the former spouse will be given his or her own annuity.
The person responsible for the arrangement must provide the member and former spouse with information about the pension share once it has been implemented.
The pension credit must be transferred to the former spouse within the implementation period. This is within four months of the effective date of the pension sharing order or agreement, or the date of receiving the pension sharing order or agreement and, in Scottish cases, documentary evidence that the agreement meets the regulatory requirements for a qualifying agreement.
Opra can extend the implementation period on an occupational pension scheme under certain circumstances covered in the draft regulations.
Serps earned in the member's own right or derived from a previous pension share can be split on divorce. Pension sharing will not apply to the basic state pension.
Serps cannot be split where there is already a sharing order in relation to the same marriage. The process for sharing is the same as for non-state benefits - there must be a pension sharing order or agreement.
The Welfare Reform and Pensions Act and the draft regulations cover what happens to the former spouse's pension credit benefits when they are held in an occupational pension scheme. This could be where the former spouse has been made a member of the scheme, or where pension credit benefits have been transferred into the scheme.
The normal benefit age under an occupational pension scheme must be between 60 and 65. The benefits may be commuted for a lump sum before normal benefit age because of serious ill health.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation