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Pensions Act 2008

Chapter 1: Pension compensation on divorce etc.
Section 107: Scope of mechanism

285.This section sets out the scope of the pension compensation sharing mechanism that will enable compensation paid by the Pension Protection Fund to be shared on divorce or dissolution of a civil partnership.

286.Subsection (2) sets out that pension compensation rights will be shareable subject to certain exceptions that will be set out in regulations.

Section 108: Interpretation

287.This section sets out the intended meaning of particular words and phrases used throughout Chapter 1 of Part 3.

Section 109: Activation of pension compensation sharing

288.This section sets out the possible orders a court could make under the MCA1973, the Matrimonial and Family Proceedings Act 1984, the Civil Partnerships Act 2004 and the Family Law (Scotland) Act 1985 which, upon taking effect, would trigger the new pension compensation sharing regime. With regard to Scotland, the section also allows for pension compensation sharing to be provided for in a ‘qualifying agreement’ – an agreement between the parties to a marriage or partners in a civil partnership as to the sharing of assets on divorce or dissolution. Although not a court order, such agreements, if made in the correct form and registered, can be enforced through the courts.

Section 110: Activation of pension compensation sharing: supplementary (Scotland)

289.This section makes additional provision in relation to Scotland, concerning the manner and time limits within which the order or qualifying agreement is to be passed to the Board of the PPF.

Section 111: Creation of pension compensation debits and credits

290.Pension compensation sharing will be initiated by an order of the court specifying a percentage of the compensation rights which are to be “shared” (i.e. transferred). The effect of this section is that the rights to compensation are valued for the purpose of the transfer on “valuation day” – a day during the “implementation period” (seesection 115) chosen by the Board.

291.Subsection (4) provides a regulation-making power to enable any description of benefit to be disregarded for the purposes of the compensation sharing calculation. For example, benefits due to a survivor as a consequence of a previous marriage or civil partnership.

Section 112: Cash equivalents

This section allows the Secretary of State to establish, in regulations, the method for the calculation of the cash equivalent in pension compensation sharing cases. It is intended that this will broadly reflect the principles set out for calculating cash equivalents for early leavers.

Section 113: Reduction of compensation

292.This section provides for the reduction of the transferor’s pension compensation payments by the percentage specified in the pension compensation sharing order (or qualifying agreement). Subsection (3)(b) provides for the calculation of a percentage, where, in Scotland, the order or agreement has specified an amount.

Section 114: Time for discharge of liabilitySection 115: “Implementation period”

293.Section 114 provides that the Board must implement the order conferring rights to compensation on the beneficiary of a pension compensation sharing order (or qualifying agreement) during the implementation period – defined in section 115 as 4 months beginning on the date on which the sharing order (or qualifying agreement) takes effect or, if later, the date on which the Board of the Pension Protection Fund receives the relevant documents.

294.Regulation-making powers are provided to allow the Secretary of State to define the parameters of this requirement. Regulations may provide for:-

  • the circumstances where the implementation period can be extended;

  • the information required (for example addresses, ages, National Insurances numbers)

  • the procedure for notifying the transferor and transferee of the day on which the implementation period begins; and

  • the effect on the implementation period where the pension compensation sharing order (or qualifying agreement) is the subject of an application for leave to appeal out of time.

Section 116: Discharge of liability

295.Section 116 sets out the procedure which the Board must follow in order to discharge its liability in respect of a pension compensation credit. The beneficiary of a pension compensation order (or qualifying agreement) will in the first place receive a notice stating that they are entitled to periodic compensation and setting out the initial annual amount of that compensation (subsection (2) and (7)). The initial annual amount will have been calculated by the Board (subsection (4)) and will reflect the value of the rights transferred by the court (subsection (5)). The timing of payments, and calculation of their amounts in the future, is set out in Schedule 5.

296.Subsection (8) provides a power to make provision for what is to happen if the person dies before the Board makes its calculation and sends out the notice. For example, regulations will provide for survivor’s benefits to be paid where appropriate.

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