UK - Significant problems remain for pension scheme trustees in being able to pass over money to which ex-spouses are entitled, according to Watson Wyatt.
This is despite court authority to grant the ex-spouse of a pension scheme member a share in the member's pension benefits, to be used to provide a pension for the ex-spouse in their own right.
It is the rules governing the alternative pension arrangements into which this money can be put that are causing the problem, said David Gordon, a senior consultant at Watson Wyatt. The Inland Revenue and the Department for Work and Pensions should consider jointly the requirements for setting up alternative pension arrangements so that the potential problems can be avoided.”
Companies have two options for investing the cash sums determined by the courts in such cases: an internal transfer, where the ex-spouse will receive pension benefits from the scheme of which their partner is a member; or an external transfer, where the money must be invested in a pension plan provided by an external provider such as an insurance company.
Many groups of trustees have expressed the wish to have a default arrangement available that they can nominate to receive the cash and provide benefits in such cases.
According to Watson Wyatt, the Inland Revenue will not allow a stakeholder or personal pension plans to be set up without the beneficiary's consent - which requires a signature on an application form.
It is clear that this situation could lead, at worst, to trustees being unable to pass over the money to which the ex-spouse is entitled, said Gordon. At the least, there could be delays and confusion, adding to the uncertainty experienced by all parties at a difficult time. With one in three marriages ending in divorce, many thousands of people could be affected.
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