Finance Act 1999

Approval of retirement benefit schemes

2 (1) In subsection (2) of section 590 of the Taxes Act 1988 (conditions for approval of scheme), for paragraph (a) there shall be substituted—

“(a) that the scheme is bona fide established for the sole purpose (subject to any enactment or Northern Ireland legislation requiring or allowing provision for the value of any rights to be transferred between schemes or between members of the same scheme) of providing relevant benefits in respect of service as an employee;”.

(2) After that paragraph there shall be inserted the following paragraph—

“(aa) that those benefits do not include any benefits payable to a person other than—

(i) the employee or a scheme member’s ex-spouse,

(ii) a widow, widower, child, or dependant of the employee or of a scheme member’s ex-spouse, or

(iii) the personal representatives of the employee or of a scheme member’s ex-spouse;”.

(3) In subsection (3) of that section (conditions for automatic approval), for paragraph (c) there shall be substituted the following paragraphs—

“(ba) that any benefit for an ex-spouse, or for the widow or widower of an ex-spouse, is a benefit in relation to which the scheme satisfies the conditions set out in subsection (3A) below;

(bb) that the scheme does not allow any rights debited to a scheme member as a consequence of a pension sharing order or provision to be replaced with any rights which that scheme member would not have been able to acquire (in addition to the debited rights) had the order or provision not been made;

(c) that no benefits are payable under the scheme other than those mentioned in paragraphs (a), (b) and (ba) above;”.

(4) In paragraph (d) of that subsection (restriction on surrender, commutation and assignment)—

(a) for “except” there shall be substituted “except—

(i) for the purpose of giving effect to a pension sharing order or provision, or

(ii) in so far as the commutation of a benefit for an ex-spouse is allowed by virtue of subsection (3A) below, or

(iii)”;

and

(b) for “his pension” there shall be substituted “a pension provided for him”.

(5) After that paragraph there shall be inserted the following paragraph—

“(da) that, in a case in which—

(i) a lump sum may be obtained by the commutation of a part of a pension provided for an employee, and

(ii) the amount of that pension is affected by the making of a pension sharing order or provision,

the lump sum does not exceed the sum produced by multiplying by 2.25 the amount which (after effect has been given to the pension sharing order or provision) is the amount of that pension for the first year in which it is payable;”.

(6) After subsection (3) of that section there shall be inserted the following subsection—

“(3A) The conditions mentioned in subsection (3)(ba) above are—

(a) that any benefit for an ex-spouse takes the form of a pension (with or without an entitlement to commute a part of that pension);

(b) that any benefit for an ex-spouse is a pension payable only on the attainment by the ex-spouse of a specified age of not less than 60 and not more than 75;

(c) that any entitlement to commute a part of the pension is exercisable only on its becoming payable;

(d) that any benefit for the widow or widower of an ex-spouse is confined to a non-commutable pension payable on the death of the ex-spouse at a time when the ex-spouse is already entitled to receive a pension under the scheme;

(e) that any pension provided for the widow or widower of an ex-spouse is of an amount not exceeding two-thirds of the pension payable to the ex-spouse;

(f) that, in a case in which a lump sum may be obtained by the commutation of a part of a pension provided for an ex-spouse, the lump sum does not exceed the sum produced by multiplying the amount of the pension for the first year in which it is payable by 2.25.”

(7) In subsection (4) of that section (conditions that are referred to as “the prescribed conditions”), for “subsections (2) and (3)” there shall be substituted “subsections (2) to (3A)”.

(8) After subsection (4A) of that section there shall be inserted the following subsections—

“(4B) For the purposes of this section a benefit provided under any scheme is provided for an ex-spouse or the widow or widower of an ex-spouse, and shall be treated as not provided for an employee or the widow or widower of an employee, to the extent (and to the extent only) that—

(a) it is provided for a person who is, or is the widow or widower of, either—

(i) an employee who is an ex-spouse; or

(ii) a scheme member’s ex-spouse;

and

(b) it is as an ex-spouse, or as the widow or widower of an ex-spouse, that that person is the person for whom the benefit is provided.

(4C) For the purposes of this section a benefit provided for any person under any scheme is provided for that person as an ex-spouse, or as the widow or widower of an ex-spouse, to the extent (and to the extent only) that—

(a) the benefit is provided in respect of rights of an ex-spouse that are or represent rights conferred on the ex-spouse as a consequence of a pension sharing order or provision; and

(b) the scheme makes provision for the benefit to be treated as provided separately from any benefits which are provided under the scheme for the same person as an employee or as the widow or widower of an employee.

(4D) In this section “scheme member”, in relation to a scheme, means—

(a) an employee; or

(b) a person entitled to any relevant benefits under the scheme as a consequence of a pension sharing order or provision.

(4E) The following rules shall apply in calculating for the purposes of subsection (3)(da) or (3A)(f) above the amount of a person’s pension for the first year in which it is payable—

(a) if the pension payable for the year changes, the initial pension payable shall be taken;

(b) it shall be assumed that that person will survive for the year; and

(c) the effect of commutation shall be ignored.

(4F) A pension provided for an ex-spouse who is an employee, or for the widow or widower of such an ex-spouse, shall be disregarded in any determination of whether the conditions set out in subsection (3)(e) to (h) above are satisfied or continue to be satisfied in the case of that employee.”