The Teachers' Superannuation (Pension Sharing on Divorce) (Scotland) Regulations 2001

Citation, commencement, effect and extent

1.—(1) These Regulations may be cited as the Teachers' Superannuation (Pension Sharing on Divorce) (Scotland) Regulations 2001.

(2) These Regulations shall come into force on 14th May 2001 and shall have effect from 1st December 2000.

(3) These Regulations extend to Scotland only.

Amendment of the Teachers' Superannuation (Scotland) Regulations 1992

2.  The Teachers' Superannuation (Scotland) Regulations 1992(1) (“the 1992 Regulations”) shall be amended in accordance with regulations 3 to 5 of these Regulations.

Pension sharing on divorce

3.  After Part H of the 1992 Regulations shall be inserted the following:–

“PART J PENSION SHARINGPRELIMINARY PROVISIONS

Interpretation of Part J

J1.— (1) The definitions of expressions contained in Schedule 1A shall, unless the context indicates that they have a different meaning, apply for their interpretation in this Part of the Regulations as well as those definitions of expressions contained in Schedule 1.

(2) All provisions in Parts A to H of these Regulations shall, unless the context indicates otherwise, be subject to the provisions of this Part.

SHARING OF RIGHTS

Pension sharing mechanism in the Scheme

J2.— (1) Pension sharing is available under the Scheme in respect of any of a person’s shareable rights under the Scheme except as otherwise provided in this regulation.

(2) Excluded from shareable rights for the purposes of this Part of these Regulations are any rights under the Scheme in respect of which a person is in receipt of a pension by virtue of being the surviving spouse or other dependant of a deceased member with pension rights under the Scheme(2).

Pension sharing order activates pension sharing creating pension debits and credits

J3.   On the coming into effect of a pension sharing order–

(a) the transferor’s shareable rights under the Scheme become subject to a debit of the appropriate amount (“pension debit”(3)) as defined in regulation J4, and

(b) the transferee becomes entitled to a credit of that amount (“pension credit”(4)) as against the Scottish Ministers.

Calculation of “appropriate amount”

J4.— (1) Where the relevant pension sharing order specifies a percentage value to be transferred, the appropriate amount for the purposes of regulation J3 is the specified percentage of the cash equivalent of the relevant benefits on the valuation day.

(2) Where the relevant pension sharing order specifies an amount to be transferred, the appropriate amount for the purposes of regulation J3 is the lesser of–

(a) the specified amount, and

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

(3) Where the transferor is in pensionable service under the Scheme on the transfer day, the relevant benefits for the purposes of paragraphs (1) and (2) 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.

(4) Otherwise, the relevant benefits for the purposes of paragraphs (1) and (2) are the benefits or future benefits to which, immediately before the transfer day, the transferor is entitled under the terms of the Scheme by virtue of his shareable rights under it.

(5) For the purposes of this regulation, the valuation day is such day within the implementation period for the discharge of the credit referred to in regulation J3(b) as the Scottish Ministers may specify by notice in writing to the transferor and transferee.

(6) In this regulation, the transfer day means the day on which the relevant pension sharing order takes effect(5).

Pension debits and reduction of benefit

J5.— (1) Subject to paragraph (2), where a member’s shareable rights are subject to a pension debit, each benefit or future benefit–

(a) to which he is entitled under the Scheme 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 the Scheme of a member 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 paragraphs (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) In this regulation(6)–

• “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 29 of the 1999 Act 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 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 of pension sharing on protected rights and guaranteed minimum pension

J6.   Where a member has protected rights or a guaranteed minimum in relation to a pension provided by the Scheme, these shall in the case of a pension debit in relation to the member’s rights under the Scheme be reduced in terms of the provisions in sections 10(4) and (5) and 15A of the Pension Schemes Act 1993(7).

MODE OF DISCHARGE AND IMPLEMENTATION PERIOD

Discharge of pension credit liability

J7.— (1) The Scottish Ministers in relation to a pension credit derived from the Scheme may discharge their liability in respect of the credit by conferring appropriate rights under the Scheme on the ex-spouse.

(2) If the Scheme becomes closed to new members, the liability in respect of any pension credit derived from the Scheme may be discharged in accordance with paragraphs 2(3) to (5) of Schedule 5 to the 1999 Act and in accordance with regulations made under paragraph 2(3) of Schedule 5 to that Act.

(3) For the purposes of this regulation, rights conferred on the ex-spouse are appropriate if–

(a) they are conferred with effect from, and including, the day on which the pension sharing order, under which the credit arises, takes effect; and

(b) their value, when calculated in accordance with regulations made by the Secretary of State under section 30(1) of the 1999 Act in relation to the calculation of cash equivalents(8), equals the amount of the credit.

Adjustment to the amount of the pension credit payments made without the knowledge of the pension debit

J8.   If–

(a) a person’s shareable rights under the Scheme have become subject to a pension debit;

(b) the Scottish Ministers make a payment which is referable to those rights without knowing of the pension debit; and

(c) the cash equivalent of the member’s shareable rights after deduction of the payment is less than the amount of the pension debit,

the pension credit shall be reduced to that lesser amount(9).

Implementation period for discharge of pension credit

J9.— (1) The Scottish Ministers shall discharge their liability in respect of a pension credit within the implementation period(10), which for a pension credit is the period of 4 months beginning with the later of–

(a) the day on which the relevant pension sharing order takes effect; and

(b) the first day on which the Scottish Ministers in relation to the relevant pension sharing order are in receipt of–

(i) the relevant matrimonial documents, and

(ii) such information relating to the transferor and transferee as the Secretary of State may prescribe by regulations made under section 34(1)(b)(ii) of the 1999 Act(11).

(2) The reference in paragraph (1)(b)(i) to the relevant matrimonial documents is to copies of–

(a) the relevant pension sharing order; and

(b) the order, decree or declarator responsible for the divorce or annulment to which it relates,

and, if the pension credit depends on provision falling within subsection (1)(f) of section 28 of the 1999 Act, to documentary evidence that the agreement containing the provision is one to which subsection (3)(a) of that section applies.

(3) Paragraph (1) is subject to any provision made by regulations under section 41(2)(a) of the 1999 Act(12).

(4) The provisions of this regulation are subject to any provisions or requirements which the Secretary of State may make by regulations under sections 34(4)(a) and (c) of the 1999 Act which–

(a) make provision requiring a person subject to liability in respect of a pension credit to notify the transferor and transferee of the day on which the implementation period for the credit begins;

(b) provide for that section to have effect with modifications where the pension credit depends on a pension sharing order and the order is the subject of an application for leave to appeal out of time(13).

Failure to discharge liability in respect of pension credit within the implementation period Death of ex spouse within period

J10.— (1) Where the Scottish Ministers have not done what is required to discharge their liability in respect of a pension credit before the end of the implementation period for the credit–

(a) they shall, except in such cases as the Secretary of State may prescribe by regulations under section 33(2)(a) of the 1999 Act(14), notify the Regulatory Authority of that fact within such period as the Secretary of State may so prescribe; and

(b) section 10 of the Pension Act 1995(15) (power of the Regulatory Authority to impose civil penalties) shall apply where the Scottish Ministers have failed to take all such steps as are reasonable to ensure that liability in respect of the credit was discharged before the end of the implementation period for it.

(2) If the Scottish Ministers fail to perform the obligation imposed by paragraph (1)(a) above, section 10 of the Pensions Act 1995 shall apply.

(3) Where the Scottish Ministers are subject to liability in respect of a pension credit, the Regulatory Authority may on the application of the Scottish Ministers extend the implementation period for the credit for the purposes of this section if it is satisfied that the application is made in such circumstances as the Secretary of State may prescribe by regulations made under section 33(4) of the 1999 Act(16).

(4) In this regulation “the Regulatory Authority” means the Occupational Pensions Regulatory Authority.

(5) Where an ex-spouse dies before the Scottish Ministers have discharged their liability in respect of the pension credit, that liability may be discharged by the payment of a lump sum in accordance with paragraph (6).

(6) Upon the death of a pension credit member, a death gratuity shall be paid if, at the time of his death, he has not received any pension credit benefits or if he has received a pension for less than 5 years. The amount of the death gratuity to be paid is–

(a) if the pension credit member was already entitled to payment of pension credit benefits, a lump sum equal to 5 times the amount of the pension which would otherwise have been payable less any amount which has already been paid; or

(b) if the pension credit member was not entitled to pension credit benefits, a lump sum equal to that to which he would have been entitled if, on the date of his death, he had attained the age of 60.

(7) Any death gratuity referred to in paragraph (6) shall be paid to the individual nominated by the deceased to receive the gratuity or, in the absence of such a nomination, to the deceased’s spouse, whom failing, to his legal personal representative. Any nomination for the purposes of this paragraph shall be made by giving written notice to the Scottish Ministers.

APPROPRIATE RIGHTS/PENSION CREDIT BENEFITS

Appropriate rights and Pension credit benefits under the Scheme

J11.— (1) Except as referred to in this regulation or otherwise in this Part of the Regulations, the appropriate rights under the Scheme to which a pension credit member shall be entitled shall consist only of a pension, a lump sum on retirement and rights in relation to a lump sum on death as provided under the Scheme.

(2) Pension credit benefits are subject to the same indexing as other benefits payable under the Scheme.

(3) The amount of the lump sum on retirement to which a pension credit member shall be entitled shall be calculated on the same basis as if his pension were a deferred pension under the Scheme, except that no lump sum on retirement shall be paid to the pension credit member if the corresponding pension debit member has already received a lump sum from the Scheme before the date of the implementation of the pension sharing order.

(4) A pension credit member is entitled to his pension credit benefits on reaching his normal retirement age.

(5) The pension credit benefits are payable immediately on reaching normal retirement age and may not be deferred.

Additional contributions and additional periods

J12.— (1) Subject to paragraph (2) an active member, whose benefits have been made subject to a pension sharing order, shall not be allowed to replace any rights debited to the member as a consequence of the pension sharing order with any rights which the member would not have been able to acquire (in addition to the debited rights) had the pension sharing order not been made(17).

(2) The provisions of paragraph (1) shall be relaxed if in line with any taxation exception or concession, which the Inland Revenue may stipulate in relation to “moderate earners” in accordance with the limits imposed in Schedule 10 to the Finance Act 1999 and any modifications thereto made by the Inland Revenue from time to time under paragraph 18(10) and (11) of that Schedule(18), or otherwise.

Commutation: small pensions

J13.— (1) Regulation H7 shall apply, if as a result of a pension sharing order the annual rate of the retirement pension, which a member who has attained state pensionable age is entitled to be paid, falls below the sum mentioned in that regulation.

(2) Regulation H7 shall apply in respect of the retirement pension payable to a pension credit member in respect of a pension credit and the amount of that pension shall for the purpose of this regulation be aggregated with any other pension payable to that member under the Scheme.

Commutation: exceptional ill health

J14.— (1) The whole of the pension element payable in respect of a pension credit benefit may be commuted for a lump sum before normal benefit age in circumstances where the person entitled to the pension credit benefit is suffering from serious ill-health prior to the normal retirement age.

(2) In this regulation, “serious ill health” means ill health which is such as to give rise to a life expectancy of less than one year from the date on which the commutation of the pension credit benefit is applied for.

(3) The lump sum shall be equal to five times the annual rate of the pension to which the pension credit member would have been entitled if on the date of commutation he had already reached the normal retirement age.

Transfer Values

J15.   The Scottish Ministers shall not pay or accept a transfer value within the meaning of regulations F1 to F3 in respect of any pension credit rights or pension credit benefits.

MISCELLANEOUS

Charges in respect of pension sharing costs

J16.— (1) The Scottish Ministers may recover from the parties involved in pension sharing charges as set out in paragraph (2).

(2) The charges referred to in paragraph (1) are any costs reasonably incurred by the Scottish Ministers in connection with pension sharing activity other than those costs specified in paragraph (3).

(3) The costs specified in this paragraph are any costs which are not directly related to the costs which arise in relation to an individual case(19).

(4) The Scottish Ministers shall, before a pension sharing order is made, inform the member or his spouse, as the case may be, in writing of their intention to recover costs incurred with any description of pension sharing activity and provide the member or his spouse, as the case may be, with a written schedule of charges in accordance with regulations which may be made by the Secretary of State under section 41(1) of the 1999 Act(20).

Excluded membership

J17.— (1) Pension credit rights or pension credit benefits may not be aggregated with any other rights or benefits under the Scheme (including those attributable to a different pension credit).

(2) Where a pension credit member is also an active member, he may not count any period which may count for any purpose in connection with his pension credit benefit towards any membership period required under the Scheme.

Assignment

J18.   Except as may be required by law, or is necessary in law to give effect to a pension sharing order or is otherwise permitted for the purpose of this Part of the Scheme, pension credit benefits under the Scheme may not be assigned, charged or otherwise made subject to a security.

Payment of Benefits/Interest on late payment of certain benefits

J19.   The provisions of regulation E31 and E31A shall apply to the pension credit member.”.

Interpretation of 1992 Regulations

4.  After Schedule 1 to the 1992 Regulations there shall be inserted Schedule 1A as set out in Schedule 1 to these Regulations.

Minor and consequential amendments to the 1992 Regulations

5.  The 1992 Regulations shall be amended in terms of the minor and consequential amendments specified in Schedule 2 to these Regulations.

ANGUS MACKAY

A member of the Scottish Executive

St Andrew’s House,

Edinburgh

5th April 2001

We consent,

JIM DOWD

CLIVE BETTS

Two of the Lords Commissioners of Her Majesty’s Treasury

9th April 2001