Pensions Ombudsman
Funded by registration levies on all occupational pension schemes, the Pensions Ombudsman will rule on any grievances or injustice as a result of maladministration. The Pensions Ombudsman can award compensation where a pension scheme is the victim of fraud, dishonesty and misappropriation resulting in the employer becoming insolvent.

Compensation will be limited to 90.0% of the total loss for money purchase schemes and for final salary pensions 90.0% of the loss or the sum needed to restore 90.0% of the schemes minimum funding requirement (MFR) if less.


Pensions review
This review has been conducted by the Financial Services Authority (FSA) and covers the personal pensions mis-selling aimed at people wrongly sold personal pensions between 29 April 1988 and 30 June 1994. Mis-selling occurred when people who would have been financially better off at retirement by remaining in their employer's scheme, or where they were advised to transfer pension benefits from a previous employers pension scheme and invest in a personal pension plan.

The first priority phase of the review of mis-selling pensions involved older consumers at or near retirement. Phase 2 considers younger consumers typically between 30 to 40 years of age. By September 2001 the total number of cases reviewed was about 1.242 million of which 845,561 were found to be reviewable. Of the reviewable cases, 630,000 and 512,064 have had offers made to the value of £8,000 million of which 453,505 have accepted the offer.

These offers have amounted to compensation paid to September 2001 of £3,931 million. The total compensation paid by the end of the pensions review, target date being 30 June 2002, is expected to be in excess of £10,700 million.


Pension Schemes Act 1993
Pensions are subject to detailed legislation found in various Acts and brought into force through subordinate legislation called Statutory Instruments laid before Parliament by the Lord Chancellor. The Pension Schemes Act 1993 (PSA 93) had many of its regulations brought into force from 1997 and covers many aspects of an occupational pension scheme and personal pensions.

Part III of the Act is concerned with certification of pension schemes and the effects on a members state scheme rights as well as issues of contracting out. Part IV of the PSA 93 refers to protection for members leaving service early and the preservation of benefits under occupational pension schemes. Chapter II of Part IV deals with revaluation of deferred pensions whereas Chapter III involves the protection of increases in the guaranteed minimum pension (GMP) resulting in the banning of anti franking and Section 94 of Chapter IV is concerned specifically with the calculation of the cash equivalent transfer value (CETV).

Part V refers to the annual increases of pension in payment for a final salary pension or GMP and Part VI introduces disclosure of information by the scheme to the scheme member and this part was strengthened later by the Pensions Act 1995. In Part IX the PSA 93 is concerned with the modification and winding up of a scheme and Part X with the investigations made by the Pensions Ombudsman.


Pension Schemes Office
Following the Retirement Benefits Scheme (Information Powers) Regulations 1995, the Pension Schemes Office (PSO) made significant changes to the reporting requirements of occupational pension schemes, as per the latest PSO practice notes published in August 1997.

The PSO supervision rules were extended to include inspection visits with compliance audit teams. Failure of occupational pension schemes to comply with the PSO could result in fines that would be significant in cases of fraud or negligently inaccurate information.


Pensionable service
As defined by the Social Security Act 1973 (SSA 73), the pensionable service for a member is the period of time during which retirement benefits are allowed to accrue. This applies to an occupational pension scheme, either a private sector scheme or a unfunded public service scheme, where the scheme rules may restrict when a new employee can become a member by imposing a waiting period. These schemes will also specify when the member will retire and this will also restrict the pensionable service.


Pension sharing
Since the introduction of earmarking provisions in section 166 of the Pensions Act 1995 inserting sections 25B to 25D of the Matrimonial Causes Act 1973 (MCA 73), matrimonial lawyers have realised the extent of earmarking limitations for pensions on divorce. The original aim was to achieve a clean break on divorce and realise pension splitting for the parties concerned.

An enabling clause in section 16 of the Family Law Act 1996 allowed the legislation to evolve and pension sharing provisions were introduced by the Welfare Reform and Pensions Act 1999 (WRPA) that apply for a divorce petition or nullity petition after 1 December 2000. The WRPA inserted section 21A to the MCA 73 dealing with a pension sharing order and ultimately the core pension sharing legislation still resides with the MCA 73.

The application of the MCA 73 and WRPA is left to subordinate legislation in the form of statutory instruments where specific regulations detail the procedures, for example the provision of information, charging or valuation. Pension sharing is only available to married couples and is not available to cohabitants applying to divorce and nullity of marriage only, unlike earmarking that includes divorce, nullity and judicial separation. Pension sharing is not compulsory and it will still be possible for couples on divorce to select earmarking or offsetting as options where appropriate.


Pension sharing limitations
The introduction of pension sharing from 1 December 2000 has been seen as a significant improvement on the extent of earmarking limitations involving pension arrangements, as the parties can achieve a clean break of the financial matters. However, there are some limitations of its use in that a pension sharing order can only be made on divorce or nullity of marriage.

This means that during ancillary relief proceedings, judicial separation will have access only to offsetting and earmarking to resolve the retirement benefits. A pension sharing order will not be made where there is an existing earmarking order applied to a particular pension arrangement as specified in section 24B of the Matrimonial Causes Act 1973 (MCA 73). This will apply to an order from a previous marriage as well as to the marriage in question.

It is possible therefore for a scheme member with several pensions to avoid a pension sharing order to the detriment of the current partner, by making a pension transfer to the earmarked pension arrangement. When a pension sharing order is made a variation of settlement order will not be allowed once the decree nisi has been made absolute. This is due in part to new provisions in the MCA 73 that protect the pension scheme against further variation.

However, other pension arrangements of the scheme member not subject to any orders could be so at a later date. The scheme member could then minimise future liabilities by directing contributions to the pension arrangement subject to the pension sharing order.