Citation, commencement and effect

1. —(1) These Regulations may be cited as the Retirement Benefits Schemes (Sharing of Pensions on Divorce or Annulment) Regulations 2000 and shall come into force on 10th May 2000.

(2) Regulations 3 to 8 have effect in relation to schemes which have been approved by the Board under section 591 of the Taxes Act 1988( 2 ) before 10th May 2000.

Interpretation

2. In these Regulations—

“the Board” means the Commissioners of Inland Revenue;

“director” has the meaning given by section 612(1) of the Taxes Act 1988 ;

“ex-spouse” has the meaning given by section 659D(1)( 3 ) of the Taxes Act 1988 ;

“moderate earner” has the meaning given by regulation 5(4) to (6);

“pension sharing order or provision” means any such order or provision as is mentioned in section 28(1) of the Welfare Reform and Pensions Act 1999 ( 4 ) or Article 25(1) of the Welfare Reform and Pensions (Northern Ireland) Order 1999 ( 5 );

“the permitted maximum” has the meaning given by section 590C( 6 ) of the Taxes Act 1988 ;

“Schedule 10” means Schedule 10 to the Finance Act 1999 ;

“scheme” means a retirement benefits scheme;

“simplified defined contribution scheme” has the meaning given by regulation 2(1) of the Retirement Benefits Schemes (Restriction on Discretion to Approve) (Additional Voluntary Contributions) Regulations 1993 ( 7 );

“ the Taxes Act 1988 ” means the Income and Corporation Taxes Act 1988 .

Prescribed modifications of Schedule 10 in prescribed circumstances

3. Regulations 4 to 8 prescribe circumstances in which Schedule 10 shall apply with the modifications prescribed by those regulations in the case of schemes approved by the Board before 10th May 2000.

Modifications of Schedule 10 in relation to simplified defined contribution schemes

4. —(1) In the circumstances prescribed by paragraph (2), Schedule 10 shall apply to a scheme with the modification prescribed by paragraph (3).

(2) The circumstances prescribed by this paragraph are circumstances where a scheme is a simplified defined contribution scheme.

(3) The modification prescribed by this paragraph is that paragraph 18(5) of Schedule 10 shall be omitted.

Modifications of Schedule 10 as regards members of schemes who are moderate earners

5. —(1) In the circumstances prescribed by paragraph (2), Schedule 10 shall apply to a scheme as regards an employee within that paragraph with the modification prescribed by paragraph (3).

(2) The circumstances prescribed by this paragraph are circumstances where the employee—

(a) is a member of a scheme which is not a simplified defined contribution scheme;

(b) is an ex-spouse whose rights under the scheme have been debited as a consequence of a pension sharing order or provision; and

(c) is a moderate earner.

(3) The modification prescribed by this paragraph is that paragraph 18(5) of Schedule 10 shall be omitted.

(4) In this regulation, and in regulations 6 to 8, “moderate earner” means an employee—

(a) who is not a controlling director of a company which is his employer, and

(b) whose earnings at the date at which his marriage was dissolved or annulled were not more than 25 per cent. of the permitted maximum for the year of assessment in which the dissolution or annulment occurred.

(5) For the purposes of paragraph (4)(a), an employee is a controlling director of a company which is his employer if he is a director of the company to whom paragraph (b) of section 417(5)(b) of the Taxes Act 1988 applies either—

(a) at the date on which the marriage was dissolved or annulled, or

(b) at any time within the period of ten years before that date.

(6) For the purposes of paragraph (4)(b), an ex-spouse’s earnings shall be taken to be the total amounts of emoluments—

(a) which were paid to the ex-spouse in consequence of pensionable service to which the scheme relates during the year of assessment before the year of assessment in which the marriage was dissolved or annulled, and

(b) from which tax was deducted in accordance with the Income Tax (Employments) Regulations 1993( 8 ).

Modifications of Schedule 10 as regards members who are not moderate earners—schemes providing lump sum retirement benefits only

6. —(1) In the circumstances prescribed by paragraph (2), Schedule 10 shall apply to a scheme as regards an employee within that paragraph with the modification prescribed by paragraph (3).

(2) The circumstances prescribed by this paragraph are circumstances where the employee—

(a) is a member of a scheme which—

(i) is not a simplified defined contribution scheme; and

(ii) provides him with lump sum retirement benefits only which do not exceed three eightieths of his final remuneration for each year of service up to a maximum of 40;

(b) is an ex-spouse whose rights under the scheme have been debited as a consequence of a pension sharing order or provision; and

(c) is not a moderate earner.

(3) The modification prescribed by this paragraph is that in paragraph 18(5) of Schedule 10 the words “and (da)” shall be omitted.

Modifications of Schedule 10 as regards members who are not moderate earners—schemes providing lump sums otherwise than by the commutation of a part of a pension

7. —(1) In the circumstances prescribed by paragraph (2), Schedule 10 shall apply to a scheme as regards an employee within that paragraph with the modifications prescribed by paragraph (3).

(2) The circumstances prescribed by this paragraph are circumstances where the employee—

(a) is a member of a scheme which—

(i) is not a simplified defined contribution scheme; and

(ii) provides him with a lump sum otherwise than by the commutation of a part of a pension;

(b) is an ex-spouse whose rights under the scheme have been debited as a consequence of a pension sharing order or provision;

(c) is not a moderate earner; and

(d) is not an employee within regulation 8(2)(b).

(3) The modifications prescribed by this paragraph are that—

(a) in paragraph 18(5) of Schedule 10—

(i) the words “and (da)” shall be omitted; and

(ii) at the end after the words “ the Taxes Act 1988 ” there shall be added the words “and provision of the description set out in sub-paragraph (5A) below”; and

(b) after paragraph 18(5) of Schedule 10 there shall be inserted the following sub-paragraph—

“ (5A) The description of provision referred to in sub-paragraph (5) above is provision providing that in a case in which—

(a) a lump sum may be obtained otherwise than by the commutation of a part of a pension provided for an employee, and

(b) the amount of that pension is affected by the making of a pension sharing order or provision,

the lump sum does not exceed the sum produced by multiplying by 3 the amount which (after effect has been given to the pension sharing order or provision) is the amount of the pension for the first year in which it is payable calculated in accordance with section 590(4E) ( 9 ) of the Taxes Act 1988. ”

Modifications of Schedule 10 as regards members of schemes who are not moderate earners and to whom paragraphs 2, 3, 4 and 6 of Schedule 23 to the Taxes Acts 1988 do not apply

8. —(1) In the circumstances prescribed by paragraph (2), Schedule 10 shall apply to a scheme as regards an employee within that paragraph with the modifications prescribed by paragraph (3).

(2) The circumstances prescribed by this paragraph are circumstances where—

(a) the employee is a member of a scheme which—

(i) is not a simplified defined contribution scheme; and

(ii) provides for a lump sum either by the commutation of a part of a pension or otherwise; and

(b) the employee—

(i) in the case of a scheme approved by the Board before 23rd July 1987, was a member of the scheme before 17th March 1987; or

(ii) is an employee as regards whom the provisions contained in paragraphs 2, 3, 4 and 6 of Schedule 23 to the Taxes Act 1988 are disapplied either by regulation 3 or 4ZA of the Occupational Pension Schemes (Transitional Provisions) Regulations 1988( 10 ) or by virtue of a direction of the Board made under regulation 11 of those Regulations; or

(iii) is an employee who—

(a) was a member of a scheme before 17th March 1987, and

(b) on or after 17th March 1987 becomes a member of another scheme to which Schedule 23 to the Taxes Act 1988 does not apply,

and whom the Board, in exercising their discretion under section 591 of the Taxes Act 1988, allow to be treated as having been a member of that other scheme before 17th March 1987; and

(c) the employee—

(i) is an ex-spouse whose rights under the scheme have been debited as a consequence of a pension sharing order or provision; and

(ii) is not a moderate earner.

(3) The modifications prescribed by this paragraph are that—

(a) in paragraph 18(5) of Schedule 10—

(i) the words “and (da)” shall be omitted; and

(ii) at the end after the words “ the Taxes Act 1988 ” there shall be added the words “and provision of the description set out in sub-paragraph (5AA) below”; and

(b) after paragraph 18(5) of Schedule 10 there shall be inserted the following sub-paragraphs—

“ (5AA) The description of provision referred to in sub-paragraph (5) above is provision providing that in a case in which—

(a) a lump sum may be obtained either by the commutation of a part of a pension provided for an employee or otherwise, and

(b) the amount of the pension is affected by the making of a pension sharing order or provision, the lump sum shall not exceed the greater of either A or B.

(5B) In sub-paragraph (5AA) above, A is the sum produced by multiplying by either—

(a) 2.25, in the case of a scheme which provides for a lump sum by the commutation of a part of a pension, or

(b) 3, in the case of a scheme which provides for a lump sum otherwise than by the commutation of a part of a pension,

the amount which (after effect has been given to the pension sharing order or provision) is the amount of the pension for the first year in which it is payable calculated in accordance with section 590(4E) of the Taxes Act 1988.

(5C) In sub-paragraph (5AA) above, B is the sum produced by the following formula—