Schedule 3: Pension sharing orders: England and Wales
Paragraph 2 inserts a definition of the pension sharing order (new section 21A of the Matrimonial Causes Act 1973).
Section 21A(1) explains that there are two elements to a pension sharing order. The first is a direction that the rights which one of the parties to a marriage has under a particular pension arrangement, or under SERPS, be subject to pension sharing for the benefit of the other party. The second is the specification of the percentage of the value of the rights which is to be transferred (in accordance with the pension sharing mechanisms) from one party to the other.
Section 21A(2) explains what a pension sharing order can relate to. The scope of a pension sharing order is defined by reference to the scope of the pension sharing mechanisms under the law of England and Wales and Scotland (for which provision is made in Part IV of the Act) or under the law of Northern Ireland (for which provision may be made by separate Northern Ireland legislation). The pension sharing mechanisms extend to rights under pension arrangements and rights under SERPS.
Paragraph 3amends section 24 of the Matrimonial Causes Act 1973. The purpose is to prevent pension sharing by variation of a marriage settlement after pension sharing orders are made available under the Matrimonial Causes Act 1973 (see Brooks v Brooks [1996] AC 375).
Paragraph 4 inserts new sections 24B, 24C and 24D in the Matrimonial Causes Act 1973.
Section 24B gives the court in England and Wales power to make pension sharing orders on or after the granting of a decree of divorce or nullity. It also imposes restrictions on the making of pension sharing orders. An order cannot take effect unless the decree of divorce or nullity has been made absolute and cannot be made:
subsections (3) and (4): where the pension arrangement, or shareable state scheme rights, are the subject of a pension sharing order in relation to the marriage (ie where the order has been made, but has not yet taken effect) or have been the subject of pension sharing between the parties to the marriage (ie where a pension sharing order or agreement has already taken effect);
Note: until Part II of the Family Law Act 1996 comes into force it will not be possible under this Act to pension share by agreement in England and Wales
subsection (5): in relation to a person’s pension rights which are subject to a financial provision order which includes provision under the earmarking/attachment provisions (sections 25B and 25C), whether the order was made in relation to the same marriage or a previous one.
Section 24C requires a pension sharing order to be stayed for a prescribed period in accordance with regulations made by the Lord Chancellor. The intention is that this prescribed stay period will prevent the order taking effect until the end of the period allowed for an appeal ‘in time’. This device will mean that the person responsible for the pension arrangement or the Benefits Agency (as the case may be) will not start to implement an order unless the time for appeal has expired. If notice of appeal is given within that period, the order will be further stayed pending the outcome of the appeal. The purpose is to avoid pension arrangements having to unscramble the implementation of orders because of appeals.
Section 24D enables a court to include provision in a pension sharing order about how the pension sharing charges which may be levied under section 38, or corresponding Northern Ireland legislation, are to be borne by the parties.
Paragraph 5extends the application of section 25 of the Matrimonial Causes Act 1973 (which lists the factors which the court has to take into account when considering whether and how to exercise its powers to make a financial provision order or property adjustment order) to cover pension sharing orders.
Paragraph 6: Section 25A(1) of the Matrimonial Causes Act 1973 imposes a duty on the court when it is deciding to exercise its powers to make financial provision orders and property adjustment orders to consider whether it would be appropriate to exercise its powers to achieve a clean break (that is to terminate all financial obligations between the parties). This paragraph extends the provision to include pension sharing orders.
Paragraph 7extends the court’s power under section 31 of the Matrimonial Causes Act 1973 so that, where the provision applies, the court can make, vary or discharge pension sharing orders as well as financial provision and property adjustment orders.
Sub-paragraph (2) inserts a new section 31(2)(g). The powers of the court under section 31(1) are to apply pension sharing orders made under section 24B of the Matrimonial Causes Act 1973 before the decree of divorce or nullity has been made absolute.
Sub-paragraph (3) inserts three new subsections – (4A), (4B) and (4C) -into section 31.
Subsection (4A) provides that the court may only exercise its powers under section 31(1) in relation to a pension sharing order if the application for the variation, discharge etc. was made before the order has taken effect and if, at the time of the application, the decree of divorce or nullity has not been made absolute. For these purposes, a pending application for a section 31(1) order will prevent the pension sharing order taking effect (new section 31(4A)(b)).
Subsection (4B) prevents the variation of a pension sharing order taking effect before a decree of divorce or nullity is made absolute.
Subsection (4C) Variations of pension sharing orders under section 31(1) will be subject to a stay period to be prescribed by regulations in the same manner as pension sharing orders made under section 24B.
Sub-paragraph (4) amends section 31(5) of the Matrimonial Causes Act 1973. This provides that, apart from under the capitalisation of maintenance provisions, pension sharing orders are not to be made on an application to vary any periodical payments order.
Sub-paragraph (5) extends the powers of the court under the ‘capitalisation of maintenance’ provisions to include the making of a pension sharing order.
Sub-paragraph (6) inserts a new subsection (7G) into section 31. It imposes on the making of a pension sharing order under section 31(7B) the same restrictions as apply under section 24B(3)-(5).
Paragraph 8 amends section 33A of the Matrimonial Causes Act 1973 by adding pension sharing orders to the list of consent orders which can be made by the court on the basis of prescribed information without further enquiry.
Paragraph 9 amends section 37 of the Matrimonial Causes Act 1973. It extends the powers of the court to set aside transactions intended to prevent or reduce financial relief to applications for pension sharing orders on divorce or nullity.
Paragraph 10 inserts a new section 40A of the Matrimonial Causes Act 1973 about the powers of the court to which an appeal is made, where that appeal is begun on or after the day on which the pension sharing order takes effect.
Subsection (2) prevents the court from setting aside or varying the order if the person responsible for the pension arrangement has acted to his detriment following the taking effect of the order (for example, by making a transfer payment to another scheme or arrangement);
Subsection (3) prevents the court from setting aside or varying the order if the Secretary of State has acted to his detriment following the taking effect of the order.
Subsection (4) provides that for the purpose of determining whether a person has suffered detriment the court may disregard insignificant detriment.
Subsection (5) provides that where subsection (2) or (3) applies, the appeal court may make such further orders as it considers appropriate to put the parties in a position it considers appropriate.
Subsection (6) has the effect that a pension sharing order under section 40A is only subject to a stay order if the decision of the appeal court can itself be the subject of an appeal.
Paragraph 11inserts a new paragraph into section 52(2) of the Matrimonial Causes Act 1973. The amendment states that references to pension sharing orders are to be construed in accordance with the new section 21A. Section 52 is an interpretation section. This amendment creates consistency in the textual treatment of pension sharing orders and other types of financial relief in the 1973 Act.
Schedule 4: Amendments of sections 25B to 25D of the Matrimonial Causes Act 1973.
Schedule 4 amends the current earmarking provisions of the Matrimonial Causes Act 1973 to ensure that they fit with the system proposed for pension sharing and makes certain provision relating to pension sharing. Paragraphs 1 to 3 include amendments to sections 25B to 25D of the 1973 Act which are consequential on the pension sharing provisions, and, in particular, on the introduction of the expression “pension arrangement” which encompasses pension rights held in policies of insurance, retirement annuity contracts, as well as occupational pension and personal pension schemes. Accordingly, throughout those sections “pension arrangement” is substituted for “pension scheme” and “person responsible for the arrangement” for “trustees or managers”. In addition:
Paragraph 1(3)provides that section 25B(2) shall cease to have effect. Provisions to similar effect are already in section 25. The removal of the duplication will make the provisions easier to understand.
Paragraph 1(6) substitutes a new section 25B(5) which provides that orders for payment under subsection (4) may only be expressed in percentage terms. Hitherto, it has been possible for the order to specify an amount or a percentage.
Paragraphs 1(8)clarifies the wording of section 25B(7) concerning commuted benefits.
Paragraph 1(9)introduces three new subsections into section 25B. The first two subsections restrict the court's powers under section 25B. In particular they prevent pension earmarking if the pension arrangement is subject to a pension sharing order in relation to the marriage which has not yet taken effect or has already been the subject of a pension share by the parties.
Paragraph 2(5)inserts a new section 25C(4) prohibiting compulsory nominations for death benefits in cases where the pension arrangement is subject to a pension sharing order in relation to the marriage which has not taken effect or has already been the subject of a pension share by the parties.
Paragraph 3(2) substitutes a new section 25D(1) for the existing provisions. The difference between the new and the old provisions are consequential in nature. The new section 25D(1)(b) provides that the new pension arrangement must have been appropriately notified in accordance with the Lord Chancellor’s regulations.
Paragraph 3(3)amends section 25D(2). As amended this subsection enables regulations to be made by the Lord Chancellor in relation to the following:-
(a)payment of sums due under pension earmarking orders
(b)rights and liabilities of the parties affected in cases where a payment has been made under a mistaken belief that an earmarking order was valid;
(c)notification of changes of circumstances;
(d)discharge of liability under an earmarking order of the person responsible for a pension arrangement;
(e)calculation and verification in relation to the valuation of benefits under a pension arrangement or shareable state scheme rights for the purpose of enabling the court to exercise its powers to make financial orders, under this part of this Act.
Paragraph 3(5)inserts additional definitions for the purposes of the amendments mentioned.
