Guidance on Pension Sharing on Divorce
Guidance given to the Society under the Welfare Reform and Pensions Act 1999
Under The Welfare Reform and Pensions Act 1999 the following guidance in relation to the requirements of the financial services legislation has been given to the Judicial Procedure Committee of the Society.
There are three stages to be considered separately in this area.
The first stage is the gathering of information about the value of the assets including the pension. This stage is not of itself Investment Business and can be done by a solicitor. Valuation methods used should be in accordance with the pension regulations, such as the cash equivalent method.
The second stage is the important decision on whether to opt for ear marking, sharing, or offsetting the pension entitlement. This stage is Investment Business under the Society’s current Investment Business Rules. After the new legislation on Investment Business comes into force this will probably be an incidental activity which firms which do not need FSA authorisation can undertake under Law Society rules where it is connected with legal work. Until the new regime is brought into force, which is expected to be later this year, such financial advice can only be given by a firm authorised to conduct investment business or an independent financial adviser.
The third stage only applies if the client wishes to opt to share the pension. Advice on how to deal with that, and in particular whether to leave it in the existing pension scheme or take it out to put into a separate scheme, is specialist pension advice and would only be available from those with that particular authorisation. Currently there are only about six solicitors firms in Scotland with that authorisation but other Independent Financial Advisers with specialist pension authorisation could also provide this advice.
It should be borne in mind in all cases that, even where pension sharing is not used, clients may require pensions and other investment advice in their changed marital and financial status.