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PSI2.3.25 - Taxation Background: CHAPTER I PART XIV ICTA 88 - Finance (No2) Act 1987, Finance Act 1989 and Finance Act 1999 Changes – Pension Sharing on Divorce


(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)

In some instances the overriding legislation in paragraph 18(5) of Schedule 10, Finance Act 1999 (see Introduction 4.18) is too restrictive for certain members, so exceptions and modifications are made to the overriding legislation by The Retirement Benefits Schemes (Sharing of Pensions on Divorce or Annulment) Regulations 2000 [SI 2000 No 1085] modify the overriding legislation in Finance Act 1999. The regulations apply to schemes that were approved under the discretionary provisions of section 591 (see PSI2.3.13) before 10 May 2000 and they

  • exclude “moderate earners” from the pension rebuilding restriction contained in section 590(3)(bb) (see PSI2.3.7) – a “moderate earner” is someone who is not a controlling director and whose earnings at the time of the divorce do not exceed ¼ of the permitted maximum
  • exclude simplified defined contribution schemes from the pension rebuilding restriction in section 590(3)(bb) and the modified lump sum restriction in section 590(3)(da) (see PSI2.3.7) – the benefits from such schemes are controlled by limits on contributions
  • modify the effect of the modified lump restriction in section 590(3)(da) (see PSI2.3.7) for members with pre 17 March 1987 continued rights
  • exclude schemes that only provide a lump sum benefit on retirement from the modified lump restriction in section 590(3)(da) (see PSI2.3.7) – the lump sum must not exceed 3/80ths of the employee’s final remuneration for each year of service up to a maximum of 40 years
  • exclude schemes that provide a pension and separate lump sum from the modified lump restriction on section 590(3)(da) (see PSI2.3.7).