Direction
power
Section 328 of the Financial Services and Markets Act 2000 (FSMA)
sets out the Direction power. It allows the Financial Services
Authority (FSA)
to prevent use of the exemption by members of a particular profession
or particular types of firm within that profession.
Alternatively, the FSA can make a Direction in terms of regulated
activity and exempt
professional firms could not then carry on that activity.
Disclosure
rules
Most firms that are regulated for investment business by their
respective recognised
professional body (RPB) are exempt professional firms from
N2. The rules of their RPB instruct the firms when they are
allowed to disclose that they are regulated for investment business.
However, from N2 exempt professional firms are not authorised
and the Financial Services Authority (FSA) will consider it
misleading to assume it is authorised.
Under Section 24(1) of the Financial Services and Markets Act
2000 (FSMA) it is
a criminal offence for a person to describe himself as an authorised
person if he is not. Therefore, disclosure rules require
an exempt professional firm to avoid any representation to its
clients that it is authorised by the FSA or that the regulatory
protection offered by the FSMA will apply.
Discretionary
benefits
For a final salary occupational pension scheme the scheme trustees
can enhance the benefits to a member in excess of their actual
entitlement at retirement
age but within Inland Revenue maximum limits and these are
referred to as discretionary benefits.
For example, the enhancement of a members pension rights
could be to give a more generous escalation rate than the
limited
price indexation (LPI) applied to pension income at retirement
age, this then being above the required retail price index
(RPI)
but below the 5.0% ceiling. The employer could request the
scheme trustees to augment a members retirement benefits on
early retirement,
redundancy, ill health or even the death benefits to the spouse.
Also, on the death of the scheme member, the trustees have
the discretionary power to award the death
in service benefit as a tax free lump sum to any individual
and not necessarily the members nominated beneficiaries.
Divorce
The ending of a marriage as a result of divorce proceedings
in anything other than amicable settlement could have a dramatic
effect on the spouses relationship with their children as
well as their personal finances. It is therefore worth considering
judicial separation
as a way of slowing down the process and mediation to reduce
conflict. A divorce petition is made initially with the intention
of obtaining a decree
nisi from the court.
For this to be granted the partner must first, as with judicial
separation, show to the court that the marriage
has irretrievably broken down and prove; adultery of the other
partner; unreasonable behaviour of the other partner; desertion
by the other partner after two years; separation with consent
after two years; and separation without consent after five
years. As for any children of the marriage a statement of
arrangements for their future must be filed with the divorce
petition if they are under 16 years of age or in full time
education.
Where there are false allegations in a divorce petition it
is important for the respondent partner to challenge the false
allegations as they could influence future contact with children
and result in costs being awarded against the respondent partner.
The decree
absolute can be obtained once agreement has been reached
and six weeks and one day after the decree nisi. When this
is granted, the divorce is final and the marriage ends.
Divorce
statistics
This is the legal ending of a marriage that will start with
the granting of a decree nisi by the court and will be finalised
with a decree absolute. Divorce in England and Wales is currently
governed by the Matrimonial
Causes Act 1973 (MCA) with significant changes being made
by the Family Law Act 1996 when it is fully implemented. According
to the Office
of National Statistics (ONS), divorce in England and Wales
has been declining.
In 1999 there were 144,556 divorces (approximately 1.3% of
the married population of 11.2 million) compared to 145,214
in 1998 and 150,872 in 1989. In 2000 there were 141,135 divorces,
down on 1999 figures possibly due to spouses deferring divorce
as a result of the introduction on 1 December 2000 of pension
sharing. These figures can be compared to the number of
marriages in 2000 of 267,961, an increase of 1.7% on 1999
of 263,515, but down significantly from the 1989 figure of
346,697.
For the whole of the UK (including Scotland and Northern Ireland)
the number of divorces were 156,800 in 2001 and increasing
to 160,700 in 2002.
For England and Wales divorces in 2000, 70% were to couples
that had married for the first time for both parties compared
to 74% in 1990. The average age for divorce from 1990 to 2000
has risen from 38.4 years to 41.3 years for men and from 35.9
years to 38.8 years for women.
Dual
membership
A former spouse will be able to make an internal
transfer of a pension credit to the members scheme where
dual membership is permitted pension
sharing order. This means the former spouse will become
a scheme member in his or her own right. For the scheme trustees
of an occupational pension scheme they must decide whether
the former spouse should qualify for discretionary benefits
and distributions of any scheme surplus.
Trustees will have to make rule amendments to the scheme
to deal with all circumstances including whether the former
spouse will have the same rights as deferred members. If the
former spouse fails to indicate to the trustees how the pension
credit is to be applied, regulations will allow the trustees
to make them a member without their consent.
Dynamisation
For an employers pension scheme such as a defined benefit
final salary
pension, dynamisation allows for the definition of final
remuneration for a scheme member to take into account increases
in pensionable earnings that have not kept up with the retail
price index (RPI). Any use of dynamisation will still be subject
to the earnings
cap.
The earnings of the member during the definition years, say
the best three years except the final year preceeding the
retirement age, will be averaged and revalued in line with
the increase in the RPI to give the final
remuneration. Dynamisation will usually increase the retirement
benefits in the form of a pension income and any commutation
to a tax free lump sum for the scheme member.
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