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   Family Law Act 1996    Fee based adviser    Final remuneration
   Family Law (Scotland) Act 1985    Final salary pension    Final hearing

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Family Law Act 1996
Although due to be fully in force by the year 2000, the government announced in December 2000 that the Family Law Act 1996 (FLA 96) would in part, be postponed probably for several years. Divorce in England and Wales is currently governed by the Matrimonial Causes Act 1973 (MCA 73) where an application for divorce can only be made if the couple have been married for a year or more and the only ground for a divorce petition is that the marriage has irretrievably broken down.

The action of adultery, unreasonable behaviour, desertion (after two years), two years of separation (with consent) or five years of separation (without consent) will prove this to the court. The FLA 96 would bring in significant changes if introduced fully, where Part II of the Act will allow for no fault divorce. This means that no ground will have to be shown as to why the marriage has irretrievably broken down with the application.

However, the new procedures for divorce would encourage mediation and conflict resolution for divorcing couples. The Family Law Act 1996 was passed by parliament and will be brought into force with statutory instruments by the Lord Chancellor in stages.


Family Law (Scotland) Act 1985
For divorce cases in Scotland the Family Law (Scotland) Act 1985 treat the members pension rights as part of the matrimonial assets that must be divided between the parties in divorce. In Scotland, only the retirement benefits accrued since the beginning of the marriage will be taken into account up to the time of divorce when the court has granted the decree absolute.

In England, Wales and Northern Ireland all retirement benefits, including those accrued before the marriage are considered up to the time of divorce when the court has granted the decree absolute and not initially when the decree nisi is granted.


Fee based adviser
A pensions consultant, actuary or IFA who does not rely on commission but rather charges clients a fee. This is based on the amount of time spent on the client's monetary matters. Any commission paid to the fee based adviser will be either off-set against the fee charged or used to enhance the benefits of the investment being implemented.


Final hearing
If during the application for a financial order and after the financial dispute resolution (FDR) appointment the couple on divorce, judicial separation or nullity of marriage cannot come to an agreement over the matrimonial assets for ancillary relief, the judge will set a date for a final hearing.

At the final hearing as shown in step-by-step guide a judge, that is not the same judge from the FDR appointment, will review the case carefully including any expert evidence where a valuation of a complex pension arrangement such as a public service scheme or final salary pension was agreed or required to be submitted, during the FDR or first appointment.

For divorce and nullity the final order cannot be made before granting of the decree nisi and the order cannot come into force until the granting of the decree absolute. The court at this stage can make the order against the matrimonial assets, or in the case of a members pension rights grant an earmarking order or pension sharing order against the retirement benefits of the parties where appropriate.


Final remuneration
The calculation of retirement benefits such as pension income, tax free lump sum and widows pension will depend on the definition of final remuneration determined by the scheme trustees of an occupational pension scheme such as a final salary pension. This could simply be the scheme members basic salary or full pensionable earnings based on pay as you earn (PAYE) income. The Pension Schemes Office (PSO) applies two definitions of final remuneration as the;

Average total pensionable earnings of an employee liable to schedule E tax over three or more consecutive years in the last ten years before retirement age;
   
Or basic annual pay of an employee liable to schedule E tax for any one of five years before normal retirement age plus the average of three or more consecutive years of taxable fluctuating payments such as bonuses, commission, overtime, profit related pay and taxable benefits in kind.

Where an individuals salary has not increased in line with the retail price index (RPI) during the definition period an adjustment can be made to calculate a higher pension and this is known as dynamisation. It can apply to all years preceding normal retirement age except the final year. The definitions used do not consider the payment of pension income after retirement in terms of a flat rate, increasing at limited price indexation (LPI) or any discretionary benefits that may be paid by the scheme trustees.


Final salary pension
The term final salary is used to describe the employers pension scheme that offers a predetermined level of pension benefit and is also known as a defined benefit scheme. The benefits are expressed as a fraction of the final salary for every complete year worked for the company or as a scheme member of the final salary pension.

The cost of providing this scheme cannot be accurately determined and therefore although the benefits can be defined, the contributions will need to be reviewed by the scheme trustees and adjusted accordingly. These contributions must now be made in accordance with the minimum funding requirement (MFR) to ensure final salary schemes are adequately funded.

For joiners after 1 June 1989 the maximum pension from a final salary scheme is 2/3rds final remuneration requiring a minimum of 20 years service, subject to the earnings cap. This means the fraction cannot be less than 1/30th for each year of service with most companies offering 1/60th schemes requiring 40 years of service to achieve the maximum pension. There will also be the possibility for commutation to a tax free lump sum.
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