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Article – Pensions on Divorce – Where are we now? – David
Salter (June 2004) Case law Case 1 Field v Field [2003] 12PBLR Case 2 Pearce v Pearce [2003] JFCR 178 Use of
pensions to enforce lump sum orders Now that pensions are being treated as an asset much like
a home or a bank account (although there are several material differences in
practice) the question arises whether a pension can be attached as a
conventional asset as part of an attempt to enforce financial orders. In Field v Field [2003] 12 PBLR (United Kingdom: England
and Wales: High Court: Family Division) 2002 October 28 (Divorce – Remedies –
Sharing – Attachment – Charging orders – Injunctions – Appointment of
receiver – Scheme rules – Anti-alienation rules – Whether orders may be made
by the court over personal pension entitlements where breach of an order for
payment of a lump sum) Mr Field failed to comply with a court order following
his divorce to pay a lump sum to his wife. In attempting to enforce payment
she applied for a series of remedies against his personal pension, including
a charging order, an injunction and the appointment of a receiver. The
husband objected on the grounds that the court lacked jurisdiction. It was held that where there is an anti-alienation clause
in the rules of a personal pension scheme the court has no power to issue a
charging order, an injunction or the appointment of a receiver in order to
enforce the payment of a lump sum earlier ordered by the court. In the event the wife’s application was refused on all
counts. Comment The decision emphasises the continuing importance
of anti-alienation clauses in pension scheme rules at a time when it might
have been thought that the new powers of the court under the Pensions Act
1995 and the Welfare Reform and Pensions Act 1999 might have made them
supernumerary. It is true that the
courts’ powers in relation to pension in matrimonial proceedings have been
much enhanced in recent years – but the fact remains that while pensions are
now often regarded as an asset much like many others, and therefore subject
to apprehension by the courts for debt, they remain sui generis. The reluctance of the court in this case to find ways
round the anti-alienation clause is a refreshing tribute to the effectiveness
of the right of employers and settlers to draft such terms as they think fit,
having regards to the obligations imposed by the taxation authorities and the
requirements of public policy. The Law Commission’s proposals in 2002 to
outlaw for example exemption clauses for professional trustees in pension
scheme rules without much (any) evidence of abuse of the current position
illustrates the ease by which the authorities assume the need to change the
rules of the game. The courts are much more aware of the need to allow
parties to establish their own parameters unless there are very good grounds
to the contrary – and are also aware, as perhaps the Law Commission is not,
of the impact of the law of unintended consequences. Pearce
v Pearce [2003] 3FCR 178 This decision indicated the Court of Appeal’s view that,
when periodical payments (maintenance) is capitalized on a variation
application, the court should first of all look at the possibility of making
a pension sharing order. In other
words, a pension sharing order should be the weapon of first choice.
Legal background
For several years matrimonial lawyers have had to consider
how to deal with the parties’ pension rights on divorce. A series of
legislative enactments has enabled the courts to deal with pension rights
either by ‘offsetting’ (available under general matrimonial law), attachment
(permitted following the Pensions Act 1995) and sharing (permitted following
the Welfare Reform and Pensions Act 1999). The legislation with which matrimonial lawyers need to be
familiar is extensive and complex; the list is as follows: Matrimonial
Causes Act 1973 Contributions
and Benefits Act 1992 Pension
Schemes Act 1993 Pensions
Act 1995 Welfare
Reform and Pensions Act 1999 Finance
Act 1999 The Family
Proceedings Rules 1991 SI 1991 No 1247, as amended The
Pensions on Divorce etc (Provision of Information) Regulations 2000 SI 2000
No 1048 The
Pensions on Divorce etc (Charging) Regulations 2000 SI 2000 No 1049 The
Pension Sharing (Valuation) Regulations 2000 SI 2000 No 1052 The Pension Sharing
(Implementation and Discharge of Liability) Regulations 2000 SI 2000
No 1053 The
Pension Sharing (Pension Credit Benefit) Regulations 2000 SI 2000 No 1054 The Pension
Sharing (Safeguarded Rights) Regulations 2000 SI 2000 No 1055 The Divorce etc (Notification and
Treatment of Pensions) (Scotland) Regulations 2000 SI 2000
No 1050 (S.4.) The
Pensions on Divorce etc (Pension Sharing) (Scotland) Regulations 2000 SI 2000
No 1051 (S5) The
Divorce etc (Pensions) Regulations 2000 SI 2000 No 1123 The Finance Act 1999, Schedule 10,
Paragraph 18 (First and Second Appointed Days) Order 2000 ...........................................................................
No 1093 (C32) The Retirement Benefits Schemes
(Restriction on Discretion to Approve) (Additional Voluntary Contributions) (Amendment) Regulations 2000
SI 2000 No 1088 The
Retirement Benefits Schemes (Restriction on Discretion to Approve (Excepted
Provisions) ................................................................................................. Regulations 2000 SI 2000 No 1087 The Retirement Benefit Schemes (Restriction
on Discretion to Approve) (Small Self-Administered ..................................................................................
Schemes) (Amendment) Regulations 2000 SI 2000 No 1086 The Retirement Benefits Schemes
(Sharing of Pensions on Divorce or Annulment) Regulations
2000 SI 2000 No 1085 The Sharing of State Scheme Rights
(Provision of Information and Valuation) (No 2)
Regulations 2000 SI 2000 No 2914 The Pension Sharing
(Contracting-out) (Consequential Amendments) Regulations 2000
SI 2000 No 2975 The
Pension Sharing (Excepted Schemes) Order 2000 SI 2000 No 3088 Summary
Paper issued by the Lord Chancellor’s Department June 1996 Inland
Revenue, Draft model rules for pension sharing on divorce (personal pensions) Inland
Revenue, Draft model rules for pension sharing on divorce (occupational
Schemes) Pension
Schemes Office, Update No 60, Pension sharing on divorce or nullity, 22
February 2000............................................................................................. Pension
Schemes Office, Update No 62, Pension sharing on divorce or nullity, Pension Schemes Office, Update No
76,Pension sharing on divorce or nullity, Inland
Revenue, Contracted-out Employments Group, Pension sharing on divorce, July
2000 Institute
of Actuaries Guidance Note GN 11 It is likely that the legislation will be revised in due
course to take account of changes expected under the Pensions Act 2004 and the Finance Act 2004. The legislation controls the way in which court orders may
be made, how pensions are to be valued, how pension schemes should respond to
court orders, and what powers are available to the court. It also controls
the interface with state benefits, contracting-out, transfer powers and
rights to information. In practice few practitioners have the capacity to make
themselves familiar with around 100,000 words of law and practice notes and
rely for the most part on general knowledge, hope and intermittent advice
from an IFA. Site at Legal Guide. |
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