(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
Finance Act 1999 introduced measures to enable the tax law on
pensions to accommodate pension sharing on divorce. The new tax
measures complemented changes to social security and family law
contained in the Welfare Reform and Pensions Act 1999, which came
into force on 1 December 2000 and were designed to provide a clean
break between the parties to a divorce settlement in relation to
pension sharing matters. The new tax measures included:
a. The following changes to the mandatory approval requirements of section 590 ICTA 1988:
Benefits could be paid direct to a member’s ex-spouse (or
the widow/widower/dependant of an ex-spouse) following a pension
sharing order made in accordance with the Welfare Reform and
Pensions Act 1999 on the member’s benefits.
New limitations were introduced on pension and lump benefits
paid to members whose benefits were reduced by a pension sharing
order.
New conditions and limitations for the benefits paid to an
ex-spouse member or the widow/widower/dependant of an ex-spouse.
The rule on non-assignment of benefits (see
PSI6.1.22) was amended to
recognise pension sharing on divorce.
b. The payment, in particular, of pensions to
widows/widowers/dependants of ex-spouses dying before benefits
could be paid to the ex-spouse being added to the discretionary
approval conditions of section 591(2) ICTA 1988.
c. Alterations to the charging provisions of section 599 ICTA
1988 (see
PSI17.2.16) and section 600
ICTA 1988 (see
PSI17.2.29) to allow for
those member’s whose benefits are reduced by a pension
sharing order and to bring the benefits paid in respect of an ex-
spouse into the same charging provisions.
d. Changes to the definitions of retirement benefits scheme
(see
PSI1.1.2) and relevant
benefits (see
PSI1.1.4) to recognise pension
sharing on divorce.
