Executive
pension plan
Taken out by senior executives or directors, executive pension
plans (EPP) are occupational pension schemes provided by the
employer and operated by a life assurance company. The employer
will provide a contribution for the member that is deductible
against corporation tax. An EPP is regulated by the Occupational
Pensions Regulatory Authority (OPRA)
and will have to pay the general levy unless the plan is written
with one member, in which case it will be exempt.
Although an EPP can be established in addition to any employers
pension scheme it will still be subject to Inland Revenue
retirement benefit maximums, which are 2/3rds pensionable
earnings. An executive pension plans are a defined
contribution schemes so whether the member can realise
these Inland Revenue maximums will be dependent upon contributions
made and investment returns.
Exempt
approved schemes
Occupational pension schemes derive their tax privileges from
the Income and Corporation Taxes Act 1988 (ICTA
88). Exempt approval is awarded by the Inland Revenue
to occupational
pension schemes allowing the provision of benefits up
to the maximum levels as set out in the Inland Revenue practice
notes (IR12).
To be recognised as exempt approved schemes they must; be
established under irrevocable trust; have a UK resident administrator;
have employer contributions to the scheme; and the scheme
must comply with the Practice Notes. An approved
scheme is rarely used due to the extremely rigid nature
of its structure.
Exempt
person
A person who is exempt from the general
prohibition in respect of that activity as a result of
the Financial Services and Markets Act (Exemptions) Order
2000; being an appointed representative; or section 285(2)
or (3) of the Act (Exemption for recognised investment exchanges
and clearing houses); as defined in section 417(1) of the
Act (definitions).
Exempt
professional firm
This is a person to whom, under section 327 of the Financial
Services and Markets Act 2000 (FSMA),
the general prohibition does not apply. Exempt professional
firms can carry on certain exempt regulated activities that
are subordinate to and derived from their professional services,
under the supervision and regulation of a designated professional
body.
Exempt
regulated activities
Under the Financial Services and Markets Act 2000 (FSMA) regulated
activities that may be carried on by members of a profession,
which is supervised and regulated by a designated
professional body (DPB) without breaching the general
prohibition.
Expert
evidence
The court has the power through rule 2.61C of the Family Proceedings
Rules applies the Civil Procedure Rules 1998 part 35 to the
use of expert evidence (whether written or oral) to determine
a fair value for retirement
benefits of a members pension rights, other than the cash
equivalent transfer value (CETV),
where such expert evidence will not be permissible without
the courts approval.
As the introduction of expert evidence could increase the
costs associated with the divorce, the court can use its powers
to limit any excessive use of experts. In most cases projections
from providers or a suitably adjusted
CETV (reflecting the circumstances and specific needs
of the parties) supplied by a pensions consultant will be
sufficient to establish a fair value for more complicated
pension arrangements, such as an employers final
salary pension or public
service scheme. The pensions consultant must have the
appropriate qualifications as a pensions expert and it is
likely that a qualified expert would be a member of the Society
of Pension Consultants (SPC).
The parties should appoint a single pensions expert that
will be instructed jointly to value the pension arrangements,
as this will keep the costs down. The court should be made
aware of the pension arrangements and the pensions
expert at the first
appointment. Where the parties are unable to agree to
a single joint pensions expert the court has the power under
part 35 of the Civil Procedure Rules 1998 for expert evidence
to be provided by one expert only.
The court
procedure rules will approve the use of expert evidence
if it is reasonably required, or justified, or where the pension
arrangements form a significant part of the matrimonial assets
and are particularly complex in nature. Rule 2.51B of the
Family Proceedings Rules 1991 sets out the overriding objective
of the court of 'ensuring that the parties are on an equal
footing dealing with the case in ways which are proportionate
to the amount of money involved and to the complexity of the
issues and to the financial position of each party'.
External
transfer
Where a pension sharing order has been made and the former
spouse is not able to make an internal
transfer to the members scheme because dual membership
is not permitted, an external transfer must be applied to
the pension credit.
For an occupational pension scheme that is subject to the
minimum
funding requirement (MFR), the pension credit may be reduced
if the scheme is in deficit. If the scheme is under funded
the former spouse must be advised of this by the scheme
trustees and has the choice to delay an external transfer
until the scheme returns to fully funded position.
For unfunded public service schemes external transfers are
not possible but private unfunded unapproved retirement benefit
schemes (UURBs)
can offer an external transfer. If the former spouse has failed
to indicate how they wish to apply the pension
credit, the scheme trustees can make an external transfer
without their permission.
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