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Welfare Reform and Pensions Act 1999

Funded pension schemes

Paragraph 1 sets out how a funded pension scheme is to discharge its liability in respect of a pension credit. The intention is that where a pension credit is derived from a funded scheme, the person responsible for that scheme should first offer to discharge its liability for the pension credit by making a transfer payment to a suitable scheme or arrangement of the former spouse’s choice.

  • Sub-paragraph (1) limits the application of this paragraph to funded occupational schemes or personal pension schemes.

  • Sub-paragraph (2) provides that liability for a pension credit can be discharged by conferring rights on the former spouse within the member’s scheme (an internal transfer). The scheme can make the former spouse a member with her consent or in accordance with regulations. We intend to use this regulation-making power where the former spouse does not provide details of an alternative scheme or arrangement to which the scheme can discharge its liability for the pension credit.

  • Sub-paragraph (3) provides for the external discharge of liability for a pension credit to enable rights to be set up for the former spouse in another scheme or arrangement.

  • Sub-paragraph (3)(a) is self-explanatory but see paragraph 7 below for the pension arrangements which are disqualified as a destination for a pension credit.

  • Sub-paragraph (3)(b), as with a transfer of pension rights, there is no statutory obligation on an importing scheme or arrangement to accept a transfer payment.

  • Sub-paragraph (3)(c): the transfer payment can be made with the former spouse’s consent or in accordance with regulations. We intend to use this regulation-making power where the former spouse does not provide details of an alternative scheme or arrangement to which the scheme can discharge its liability for the pension credit and the scheme does not wish to give the former spouse rights within its own scheme.

  • Sub-paragraph (4): the effect of this sub-paragraph is that no account will be taken of the consent of a former spouse to the setting up of rights for her within the scheme or arrangement (an internal transfer), unless the consent is given after receiving a written offer by the scheme or arrangement to discharge its liability by making a transfer payment to another scheme or arrangement of her choice. However, consent given before receiving such an offer will count if it is not withdrawn within a week of receiving such an offer.

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