Law Act 1996
Although due to be fully in force by the year 2000, the government
announced in December 2000 that the Family Law Act 1996 (FLA
96) would in part, be postponed probably for several years.
Divorce in England and Wales is currently governed by the Matrimonial
Causes Act 1973 (MCA 73) where an application for divorce
can only be made if the couple have been married for a year
or more and the only ground for a divorce petition is that the
marriage has irretrievably broken down.
The action of adultery, unreasonable behaviour, desertion (after
two years), two years of separation (with consent) or five years
of separation (without consent) will prove this to the court.
The FLA 96 would bring in significant changes if introduced
fully, where Part II of the Act will allow for no fault divorce.
This means that no ground will have to be shown as to why the marriage has irretrievably broken down with the application.
However, the new procedures for divorce would encourage mediation
and conflict resolution for divorcing couples. The Family Law
Act 1996 was passed by parliament and will be brought into force
with statutory instruments by the Lord Chancellor in stages.
Family Law (Scotland) Act 1985
For divorce cases in Scotland the Family Law (Scotland) Act
1985 treat the members
pension rights as part of the matrimonial assets that must
be divided between the parties in divorce. In Scotland, only
the retirement benefits accrued since the beginning of the marriage
will be taken into account up to the time of divorce when the court has granted the decree absolute.
In England, Wales and Northern Ireland all retirement benefits,
including those accrued before the marriage are considered up
to the time of divorce when the court has granted the decree
absolute and not initially when the decree nisi is granted.
A pensions consultant, actuary or IFA who does not rely on commission
but rather charges clients a fee. This is based on the amount
of time spent on the client's monetary matters. Any commission
paid to the fee based adviser will be either off-set against
the fee charged or used to enhance the benefits of the investment
If during the application for a financial order and after the
financial dispute resolution (FDR) appointment the couple on
separation or nullity of marriage cannot come to an agreement over the matrimonial
assets for ancillary relief, the judge will set a date for a
At the final hearing as shown in step-by-step
guide a judge, that is not the same judge
from the FDR appointment, will review the case carefully including
any expert evidence where a valuation of a complex pension arrangement
such as a public
service scheme or final salary pension was agreed or required
to be submitted, during the FDR or first appointment.
For divorce and nullity the final order cannot be made before
granting of the decree
nisi and the order cannot come into force until the granting
of the decree absolute. The court at this stage can make the
order against the matrimonial assets, or in the case of a members
pension rights grant an earmarking order or pension
sharing order against the retirement benefits of the parties
The calculation of retirement benefits such as pension income,
tax free lump sum and widows
pension will depend on the definition of final remuneration
determined by the scheme trustees of an occupational pension
scheme such as a final salary pension. This could simply be
the scheme members basic salary or full pensionable earnings
based on pay as you earn (PAYE)
income. The Pension Schemes Office (PSO)
applies two definitions of final remuneration as the;
||Average total pensionable
earnings of an employee liable to schedule E tax over
three or more consecutive years in the last ten years
before retirement age;
||Or basic annual pay of an employee
liable to schedule E tax for any one of five years before
age plus the average of three or more consecutive
years of taxable fluctuating payments such as bonuses,
commission, overtime, profit related pay and taxable benefits
Where an individuals salary has not increased in line with the retail price
index (RPI) during the definition period an adjustment can
be made to calculate a higher pension and this is known as dynamisation.
It can apply to all years preceding normal retirement age except
the final year. The definitions used do not consider the payment
of pension income after retirement in terms of a flat rate,
increasing at limited
price indexation (LPI) or any discretionary
benefits that may be paid by the scheme trustees.
The term final salary is used to describe the employers pension
scheme that offers a predetermined level of pension benefit
and is also known as a defined
benefit scheme. The benefits are expressed as a fraction
of the final salary for every complete year worked for the company
or as a scheme member of the final salary pension.
The cost of providing this scheme cannot be accurately determined
and therefore although the benefits can be defined, the contributions
will need to be reviewed by the scheme
trustees and adjusted accordingly. These contributions must
now be made in accordance with the minimum funding requirement
to ensure final salary schemes are adequately funded.
For joiners after 1 June 1989 the maximum pension from a final
salary scheme is 2/3rds final remuneration requiring a minimum
of 20 years service, subject to the earnings
cap. This means the fraction cannot be less than 1/30th
for each year of service with most companies offering 1/60th
schemes requiring 40 years of service to achieve the maximum
pension. There will also be the possibility for commutation
to a tax free