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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.
Disclaimer:
Information found on this site does not amount to financial advice or
legal advice. Every time you access the website you agree to be bound
by the Terms and Conditions.
If you do not agree to be bound by them, you should not use the sharingpensions.co.uk
website. Before taking any action regarding pensions, pension on divorce
or any other financial or legal matter you should seek professional
advice.
