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   Mainstream financial activity    Medical conditions    Marriage
   Matrimonial Causes Act 1973    Members pension rights    Means testing
   Matrimonial assets    Matrimonial home    

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Mainstream financial activity
The Financial Services and Markets Act 2000 (FSMA) updates and replaces the Financial Services Act 1986. From N2, professional firms that carry on mainstream financial activity are now regulated directly by the Financial Services Authority (FSA).

Mainstream financial activity is regulated activity as contained in the Regulated Activity Order (RAO) and will include direct advice to clients on the choice of investment and pension products, discretionary investment management and certain types of corporate finance activities such as listings and public offers.

If a professional firm does not conduct mainstream financial activity they can under section 327 of the FSMA be designated an exempt professional firm and can then be supervised and regulated by a designated professional body (DPB) rather than the FSA. However, they must comply with their DPB restricted activities rules, the exemptions within the regulated activities order and non exempt activities order as specified by HM Treasury.


Marriage
According to the Office for National Statistics (ONS) marriage in England and Wales has been declining consistently since 1989 when the total number of marriages was 346,697. By 1999 the number of marriages had dropped by 24.0% to 263,515 and this was down slightly from the previous year of 267,303. Over this same period the divorce statistics show that divorces have fallen by only 4.2% from 150,872 in 1989 to 144,556 in 1999.


Matrimonial assets
On divorce the matrimonial assets of the couple will represent all assets held individually or jointly including fixed assets such as the family home, second property and other assets such as vehicles. Also included will be liquid assets such as personal bank accounts of each party, those held jointly, any life assurance savings plans, unit trusts, shares and since the Pensions Act 1995, inserted section 25 in the Matrimonial Causes Act 1973 (MCA 73), the pension retirement benefits of each spouse.

Any order granted by the court against the matrimonial assets, such as an earmarking order or pension sharing order on any pension arrangement, must have regard to White v White (2000) where the starting point of division should be an equal split of all these assets.

How the assets on divorce are divided will depend on the negotiations between the parties but also the complexity and structure of the assets themselves. The parties must be aware that both encashment or assignment of assets could result in a capital gains tax (CGT) charge against one or both of the parties and this should be taken into account in the final settlement.


Matrimonial home
Where the married couple are joint legal owners of the matrimonial home, both have the right to remain in the property unless the court makes an exclusion order. Various orders can be made to achieve this:

Transfer to one party's sole ownership;
   
Deferred Interest Order granted by the court. There is the right for one of the parties to occupy the matrimonial home up to an agreed point in time, such as the children are independent. It will be agreed who will pay what bills;
   
Mesher Order granted by the court. In this case usually the wife is allowed to remain in the property rent free, and the sale of the matrimonial home is postponed until the children are 17 years of age;
   
Martin Order granted by the court. The wife or husband remains in the property for the remainder of their life or until a "trigger" event occurs such as remarriage or a voluntary decision to leave the property.


Matrimonial Causes Act 1973
For a couple involved in proceedings for divorce or nullity of marriage or judicial separation the relevant principles are set out in section 25 of the Matrimonial Causes Act 1973 (MCA 73) and gives the court the power to resolve the matrimonial assets and financial matters including the value of retirement benefits of any pension arrangements held between the parties. The courts are directed to have regard to all the circumstances of the case and to seek a clean break between the parties.

Where there are children of the marriage the court will want to ensure the parties maintain their obligation and responsibilities until the children cease to be dependent. This may mean that it is not possible to achieve a clean break, as there may be a need for continued maintenance. The MCA 73 has been amended to reflect the need of the former spouse to secure members pension rights on divorce or nullity or judicial separation. Section 166 of the Pensions Act 1995 introduced earmarking and inserted sections 25B to 25D of the MCA 73.

The MCA 73 has been further amended by sections 19 and 21 of the Welfare Reform and Pensions Act 1999 (WRPA 99) that introduced pension sharing as well as making some improvements to earmarking. Although the Matrimonial Causes Act 1973 contains the primary pension sharing legislation the detailed working of pension sharing can be found on subordinate legislation and implemented through statutory instruments.


Means testing
Where an individual is applying for long term care support either, residential care or nursing home care, from either Local Authority or NHS funding, there are a number of limits relating to their personal capital. Capital is defined as including savings, investments and property.

Under section 47 of the NHS Community Care Act 1990, the Social Services must assess each applicant in relation to their needs for residential care or nursing home care. This assessment will determine how much the applicant can afford to pay after taking into account any state benefits they are entitled to claim and any other income they receive less any personal expenses.

If the individual has capital of more than £20,000 in England, there would be no assistance from full NHS funding or the Local Authority to fund long term care costs. To qualify for long term care, full assistance from the Local Authority is provided if the assets are less than £12,250 in England. There is a sliding of scale of support where the assets fall between these levels, for example in England between £12,250 and £20,000. Partial funding from the NHS is possible applying nursing care bands if the individual has assets of more than £20,000.


Medical conditions
At retirement an individual can purchase an income for both a pension annuity (compulsory purchase annuity) connected with a pension fund or a purchased life annuity where they have a lump sum.

Where the individual or their partner are currently ill or have suffered illness in the past or are a smoker or are overweight, then they could benefit from an impaired life annuity that will significantly increase the income in retirement. The medical conditions they suffer from must reduce the individuals life expectancy relative to normal mortality tables for the population in order to qualify for higher impaired rates.

If an individual suffers from a serious illness they can use the pension fund to buy an annuity on retirement that can include an enhancement and it is possible to use an open market option to search for the highest pension annuities. If retirement is due to ill health an impaired health annuity could be purchased. Learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised annuity quote offering guaranteed rates.

The leading causes of death in the UK account for 80% of all deaths for males and females that are over the age of 50 are heart disease (37.0%), cancer (24.0%), stroke (12.0%) and major organ failure (8.5%). Any individual who has survived or currently suffering from these conditions can be considered by underwriters for an impaired life annuity.

If the individual is older (possibly over 80 years of age), suffers a medical condition and is unable to perform a number of activities of daily living, an immediate needs annuity would pay a considerably higher income where the individual is moving to a nursing home. Other state benefits could be payable depending on the medical condition and if the individual's assets are below a minimum level, NHS funding or funding from the Local Authority would be possible to help fund long term care.


Members pension rights
Within pension arrangements there will accrue the members pension rights, the value of which will depend on the rules set by the scheme trustees in the case of an occupational pension scheme. For these schemes the members pension rights have been greatly influenced and improved by various pieces of key legislation starting with The Social Security Act 1973 (SSA 73) and the rights of members leaving service early. The pension rights of an individual will not start on the first day of employment if the individual is subject to a waiting period.

This then will create a difference between the members length of service and pensionable service. For the rights accrued in a final salary pension will depend on the applicable accrual rate of the scheme, the earnings used to calculate benefits if different from pensionable earnings and the length of service of the member. At retirement age the members rights will pay a pension income with the option for commutation to a tax free lump sum.

As a result of The Social Security Act 1990, the members pension rights relating to preserved benefits were required to be protected against inflation and linked to the retail price index (RPI) up to a ceiling of 5.0% per annum. The members pension rights for personal pensions are dependent on the fund value accrued from the contributions made, investment return and the annuity rate at the members retirement age. These retirement benefits will be paid to the member as a pension income where commutation to a tax free lump sum is allowed by the Inland Revenue.

At retirement the individual can use the pension fund to buy an annuity and has the option to access an open market option to search for the highest pension annuity. Once you have purchased an annuity it cannot be changed, so learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised pension annuities quote offering guaranteed rates.
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  55 £4,217  
  60 £4,691  
  65 £5,394  
  70 £6,194  
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  55 £4,299  
  60 £4,745  
  65 £5,258  
  70 £5,973  
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