This Miscellany Of Proposed Changes From April 2016 Is A Can Of Worms

"Miscellaneous" amendment regulations are often tidying up exercises and of no great consequence. However the DWP's recent consultation on its proposed Miscellaneous Amendments Regulations 2016 are a different kettle of fish and, if implemented, will in certain areas have a painful bite. We await their outcome with baited breath...

Consultation opened on 23 November 2015 and closed on 15 January 2016. Hopefully the responses will persuade DWP to re-think some of its proposals.

The proposed new regulations cover much ground. This article concentrates on the following:

problems with orders on divorce in relation to new pension flexibilities introduced in April 2015 DWP's wish to oblige trustees communicating on DC benefits to supply "generic risk warnings" potential changes to the PPF entry regulations where there is no UK qualifying insolvency event under the PPF existing entry rules A right dog(fish)'s dinner... (aka "orders on divorce, or on dissolution of a registered civil partnership")

DWP are trying to tackle the following problems:

Earmarking orders and pension flexibility Earmarking (aka attachment) orders were frequently made prior to the introduction of pension sharing on divorce. Such orders can still be made and there are a large number of historical earmarking orders in place. Under such an order, pension rights remain in the member's ownership and the member is typically obliged to pay x% of his pension and/or maximum lump sum to the former spouse when the member's pension comes into payment. This contrasts with 'pension sharing' where ownership of the underlying pension itself is split on divorce.

Now that under the April 2015 flexibilities the member can (where scheme rules allow) flexibly access his whole pension rights in one or more capital amounts, there is a risk that a former spouse may be disenfranchised (or find that expected income or capital entitlement may be changed).

DWP's proposed solution is that scheme trustees be obliged to notify the former spouse on receipt of the member's application to access benefits flexibly. However, there are practical problems here: for instance, whether the scheme trustees have a current address for the former spouse, and what the former spouse can usefully do even if successfully notified. The DWP envisage the former spouse taking legal advice and/or applying to the Court. In practice, costs will be a barrier to these steps. A better solution needs to be found.

Pension sharing and...