Welfare Reform and Pensions Bill

Welfare Reform and Pensions Bill - continued	House of Commons

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PART IV

PENSION SHARING

CHAPTER I

SHARING OF RIGHTS UNDER PENSION ARRANGEMENTS

Pension sharing mechanism

Scope of mechanism.

21. - (1) Pension sharing is available under this Chapter in relation to a person's shareable rights under any pension arrangement other than an excepted public service pension scheme.

(2) For the purposes of this Chapter, a person's shareable rights under a pension arrangement are any rights of his under the arrangement, other than rights of a description specified by regulations made by the Secretary of State.

(3) For the purposes of subsection (1), a public service pension scheme is excepted if it is specified by order made by such Minister of the Crown or government department as may be designated by the Treasury as having responsibility for the scheme.

Activation of pension sharing.

22. - (1) Section 23 applies on the taking effect of any of the following relating to a person's shareable rights under a pension arrangement-

(a) a pension sharing order under the Matrimonial Causes Act 1973,

(b) provision which corresponds to the provision which may be made by such an order and which-

(i) is contained in a qualifying agreement between the parties to a marriage, and

(ii) takes effect on the dissolution of the marriage under the Family Law Act 1996,

(i) is contained in a qualifying agreement between the parties to a marriage or former marriage, and

(ii) takes effect after the dissolution of the marriage under the Family Law Act 1996,

(d) an order under Part III of the Matrimonial and Family Proceedings Act 1984 (financial relief in England and Wales in relation to overseas divorce etc.) corresponding to such an order as is mentioned in paragraph (a),

(e) a pension sharing order under the Family Law (Scotland) Act 1985,

(f) provision which corresponds to the provision which may be made by such an order and which-

(i) is contained in a qualifying agreement between the parties to a marriage,

(ii) is in such form as the Secretary of State may prescribe by regulations, and

(iii) takes effect on the grant, in relation to the marriage, of decree of divorce under the Divorce (Scotland) Act 1976 or of declarator of nullity,

(g) an order under Part IV of the Matrimonial and Family Proceedings Act 1984 (financial relief in Scotland in relation to overseas divorce etc.) corresponding to such an order as is mentioned in paragraph (e),

(h) a pension sharing order under Northern Ireland legislation,

(i) an order under Part IV of the Matrimonial and Family Proceedings (Northern Ireland) Order 1989 (financial relief in Northern Ireland in relation to overseas divorce etc.) corresponding to such an order as is mentioned in paragraph (h).

(2) For the purposes of subsection (1)(b) and (c), a qualifying agreement is one which-

(a) has been entered into in such circumstances as the Lord Chancellor may prescribe by regulations, and

(b) satisfies such requirements as the Lord Chancellor may so prescribe.

(3) For the purposes of subsection (1)(f), a qualifying agreement is one which-

(a) has been entered into in such circumstances as the Secretary of State may prescribe by regulations, and

(b) is registered in the Books of Council and Session.

(4) Subsection (1)(b) does not apply if-

(a) the pension arrangement to which the provision relates is the subject of a pension sharing order under the Matrimonial Causes Act 1973 in relation to the marriage, or

(b) there is in force a requirement imposed by virtue of section 25B or 25C of that Act (powers to include in financial provision orders requirements relating to benefits under pension arrangements) which relates to benefits or future benefits to which the party who is the transferor is entitled under the pension arrangement to which the provision relates.

(5) Subsection (1)(c) does not apply if-

(a) the marriage was dissolved by an order under section 3 of the Family Law Act 1996 (divorce not preceded by separation) and the satisfaction of the requirements of section 9(2) of that Act (settlement of future financial arrangements) was a precondition to the making of the order,

(b) the pension arrangement to which the provision relates-

(i) is the subject of a pension sharing order under the Matrimonial Causes Act 1973 in relation to the marriage, or

(ii) has already been the subject of pension sharing between the parties, or

(c) there is in force a requirement imposed by virtue of section 25B or 25C of that Act which relates to benefits or future benefits to which the party who is the transferor is entitled under the pension arrangement to which the provision relates.

(6) Subsection (1)(f) does not apply if there is in force an order under section 12A(2) or (3) of the Family Law (Scotland) Act 1985 which relates to benefits or future benefits to which the party who is the transferor is entitled under the pension arrangement to which the provision relates.

(7) For the purposes of this section, an order or provision falling within subsection (1)(e), (f) or (g) shall be deemed never to have taken effect if the person responsible for the arrangement to which the order or provision relates does not receive before the end of the period of 2 months beginning with the relevant date-

(a) copies of the relevant matrimonial documents, and

(b) such information relating to the parties to the marriage as the Secretary of State may prescribe by regulations.

(8) The relevant date for the purposes of subsection (7) is-

(a) in the case of an order or provision falling within subsection (1)(e) or (f), the date of the extract of the decree or declarator responsible for the divorce or annulment to which the order or provision relates, and

(b) in the case of an order falling within subsection (1)(g), the date of disposal of the application under section 28 of the Matrimonial and Family Proceedings Act 1984.

(9) The reference in subsection (7)(a) to the relevant matrimonial documents is-

(a) in the case of an order falling within subsection (1)(e) or (g), to copies of the order and the order, decree or declarator responsible for the divorce or annulment to which it relates, and

(b) in the case of provision falling within subsection (1)(f), to-

(i) copies of the provision and the order, decree or declarator responsible for the divorce or annulment to which it relates, and

(ii) documentary evidence that the agreement containing the provision is one to which subsection (3)(a) applies.

(10) The sheriff may, on the application of any person having an interest, make an order-

(a) extending the period of 2 months referred to in subsection (7), and

(b) if that period has already expired, providing that, if the person responsible for the arrangement receives the documents and information concerned before the end of the period specified in the order, subsection (7) is to be treated as never having applied.

(11) In subsections (4)(b), (5)(c) and (6), the reference to the party who is the transferor is to the party to whose rights the provision relates.

Creation of pension debits and credits.

23. - (1) On the application of this section-

(a) the transferor's shareable rights under the relevant arrangement become subject to a debit of the appropriate amount, and

(b) the transferee becomes entitled to a credit of that amount as against the person responsible for that arrangement.

(2) Where the relevant order or provision specifies a percentage value to be transferred, the appropriate amount for the purposes of subsection (1) is the specified percentage of the cash equivalent of the relevant benefits on the valuation day.

(3) Where the relevant order or provision specifies an amount to be transferred, the appropriate amount for the purposes of subsection (1) is the lesser of-

(a) the specified amount, and

(b) the cash equivalent of the relevant benefits on the valuation day.

(4) Where the relevant arrangement is an occupational pension scheme and the transferor is in pensionable service under the scheme on the transfer day, the relevant benefits for the purposes of subsections (2) and (3) are the benefits or future benefits to which he would be entitled under the scheme by virtue of his shareable rights under it had his pensionable service terminated immediately before that day.

(5) Otherwise, the relevant benefits for the purposes of subsections (2) and (3) are the benefits or future benefits to which, immediately before the transfer day, the transferor is entitled under the terms of the relevant arrangement by virtue of his shareable rights under it.

(6) The Secretary of State may by regulations provide for any description of benefit to be disregarded for the purposes of subsection (4) or (5).

(7) For the purposes of this section, the valuation day is such day within the implementation period for the credit under subsection (1)(b) as the person responsible for the relevant arrangement may specify by notice in writing to the transferor and transferee.

(8) In this section-

"relevant arrangement" means the arrangement to which the relevant order or provision relates;

"relevant order or provision" means the order or provision by virtue of which this section applies;

"transfer day" means the day on which the relevant order or provision takes effect;

"transferor" means the person to whose rights the relevant order or provision relates;

"transferee" means the person for whose benefit the relevant order or provision is made.

Cash equivalents.

24. - (1) The Secretary of State may by regulations make provision about the calculation and verification of cash equivalents for the purposes of section 23.

(2) The power conferred by subsection (1) includes power to provide for calculation or verification-

(a) in such manner as may, in the particular case, be approved by a person prescribed by the regulations, or

(b) in accordance with guidance from time to time prepared by a person so prescribed.

Pension debits

Reduction of benefit.

25. - (1) Subject to subsection (2), where a person's shareable rights under a pension arrangement are subject to a pension debit, each benefit or future benefit-

(a) to which he is entitled under the arrangement by virtue of those rights, and

(b) which is a qualifying benefit,

is reduced by the appropriate percentage.

(2) Where a pension debit relates to the shareable rights under an occupational pension scheme of a person who is in pensionable service under the scheme on the transfer day, each benefit or future benefit-

(a) to which the person is entitled under the scheme by virtue of those rights, and

(b) which corresponds to a qualifying benefit,

is reduced by an amount equal to the appropriate percentage of the corresponding qualifying benefit.

(3) A benefit is a qualifying benefit for the purposes of subsections (1) and (2) if the cash equivalent by reference to which the amount of the pension debit is determined includes an amount in respect of it.

(4) The provisions of this section override any provision of a pension arrangement to which they apply to the extent that the provision conflicts with them.

(5) In this section-

"appropriate percentage", in relation to a pension debit, means-

(a) if the relevant order or provision specifies the percentage value to be transferred, that percentage;

(b) if the relevant order or provision specifies an amount to be transferred, the percentage which the appropriate amount for the purposes of subsection (1) of section 23 represents of the amount mentioned in subsection (3)(b) of that section;

"relevant order or provision", in relation to a pension debit, means the pension sharing order or provision on which the debit depends;

"transfer day", in relation to a pension debit, means the day on which the relevant order or provision takes effect.

Effect on contracted-out rights.

26. - (1) The Pension Schemes Act 1993 shall be amended as follows.

(2) In section 10 (protected rights), in subsection (1), for "subsections (2) and (3)" there shall be substituted "the following provisions of this section", and at the end there shall be added-

	"(4) Where, in the case of a scheme which makes such provision as is mentioned in subsection (2) or (3), a member's rights under the scheme become subject to a pension debit, his protected rights shall exclude the appropriate percentage of the rights which were his protected rights immediately before the day on which the pension debit arose.
	(5) For the purposes of subsection (4), the appropriate percentage is-
	(a) if the order or provision on which the pension debit depends specifies the percentage value to be transferred, that percentage;
	(b) if the order or provision on which the pension debit depends specifies an amount to be transferred, the percentage which the appropriate amount for the purposes of subsection (1) of section 23 of the Welfare Reform and Pensions Act 1999 (lesser of specified amount and cash equivalent of transferor's benefits) represents of the amount mentioned in subsection (3)(b) of that section (cash equivalent of transferor's benefits)."

(3) After section 15 there shall be inserted-

"Reduction of guaranteed minimum in consequence of pension debit.	15A. - (1) Where-
	(a) an earner has a guaranteed minimum in relation to the pension provided by a scheme, and
	(b) his rights under the scheme become subject to a pension debit,
	his guaranteed minimum in relation to the scheme shall be reduced by the appropriate percentage.
	(2) For the purposes of subsection (1), the appropriate percentage is-
	(a) if the order or provision on which the pension debit depends specifies the percentage value to be transferred, that percentage;
	(b) if the order or provision on which the pension debit depends specifies an amount to be transferred, the percentage which the appropriate amount for the purposes of subsection (1) of section 23 of the Welfare Reform and Pensions Act 1999 (lesser of specified amount and cash equivalent of transferor's benefits) represents of the amount mentioned in subsection (3)(b) of that section (cash equivalent of transferor's benefits)."

(4) In section 47 (entitlement to guaranteed minimum pensions for the purposes of the relationship with social security benefits), at the end there shall be added-

"(6) For the purposes of section 46, a person shall be treated as entitled to any guaranteed minimum pension to which he would have been entitled but for any reduction under section 15A."

(5) In section 181(1), there shall be inserted at the appropriate place-

""pension debit" means a debit under section 23(1)(a) of the Welfare Reform and Pensions Act 1999;".

Prepared 28 April 1999