Mainstream
financial activity
The Financial Services and Markets Act 2000 (FSMA)
updates and replaces the Financial Services Act 1986. From N2,
professional firms that carry on mainstream financial activity
are now regulated directly by the Financial Services Authority
(FSA).
Mainstream financial activity is regulated activity as contained
in the Regulated
Activity Order (RAO) and will include direct advice to clients
on the choice of investment and pension products, discretionary
investment management and certain types of corporate finance
activities such as listings and public offers.
If a professional firm does not conduct mainstream financial
activity they can under section 327 of the FSMA be designated
an exempt professional
firm and can then be supervised and regulated by a designated
professional body (DPB)
rather than the FSA. However, they must comply with their DPB
restricted activities rules, the exemptions within the regulated
activities order and non exempt activities order as specified
by HM Treasury.
Marriage
According to the Office
for National Statistics (ONS) marriage in England and Wales
has been declining consistently since 1989 when the total number
of marriages was 346,697. By 1999 the number of marriages had
dropped by 24.0% to 263,515 and this was down slightly from
the previous year of 267,303. Over this same period the divorce
statistics show that divorces have fallen by only 4.2% from
150,872 in 1989 to 144,556 in 1999.
Matrimonial
assets
On divorce the matrimonial assets of the couple will represent
all assets held individually or jointly including fixed assets
such as the family home, second property and other assets such
as vehicles. Also included will be liquid assets such as personal
bank accounts of each party, those held jointly, any life assurance
savings plans, unit trusts, shares and since the Pensions
Act 1995, inserted section 25 in the Matrimonial Causes
Act 1973 (MCA 73), the pension retirement benefits of each spouse.
Any order granted by the court against the matrimonial assets,
such as an earmarking order or pension
sharing order on any pension arrangement, must have regard
to White v White (2000) where the starting point of division
should be an equal split of all these assets.
How the assets on divorce are divided will depend on the negotiations between the parties
but also the complexity and structure of the assets themselves.
The parties must be aware that both encashment or assignment
of assets could result in a capital gains tax (CGT) charge against
one or both of the parties and this should be taken into account
in the final settlement.
Matrimonial
home
Where the married couple are joint legal owners of the matrimonial home, both have the right to remain in the property unless the court makes an exclusion order. Various orders can be made to achieve this:
•
Transfer to
one party's sole ownership;
•
Deferred
Interest Order granted by the court. There is the right
for one of the parties to occupy the matrimonial home
up to an agreed point in time, such as the children are
independent. It will be agreed who will pay what bills;
•
Mesher Order
granted by the court. In this case usually the wife is
allowed to remain in the property rent free, and the sale
of the matrimonial home is postponed until the children
are 17 years of age;
•
Martin
Order granted by the court. The wife or husband remains
in the property for the remainder of their life or until
a "trigger" event occurs such as remarriage
or a voluntary decision to leave the property.
Matrimonial
Causes Act 1973
For a couple involved in proceedings for divorce or nullity
of marriage or judicial separation the relevant principles are
set out in section 25 of the Matrimonial Causes Act 1973 (MCA
73) and gives the court the power to resolve the matrimonial
assets and financial matters including the value of retirement
benefits of any pension arrangements held between the parties.
The courts are directed to have regard to all the circumstances
of the case and to seek a clean
break between the parties.
Where there are children of the marriage the court will want
to ensure the parties maintain their obligation and responsibilities
until the children cease to be dependent. This may mean that
it is not possible to achieve a clean break, as there may be
a need for continued maintenance. The MCA 73 has been amended
to reflect the need of the former spouse to secure members pension
rights on divorce or nullity or judicial
separation. Section 166 of the Pensions Act 1995 introduced
earmarking and inserted sections 25B to 25D of the MCA 73.
The MCA 73 has been further amended by sections 19 and 21 of
the Welfare Reform and Pensions Act 1999 (WRPA
99) that introduced pension sharing as well as making some
improvements to earmarking.
Although the Matrimonial Causes Act 1973 contains the primary
pension sharing legislation the detailed working of pension
sharing can be found on subordinate
legislation and implemented through statutory instruments.
Means
testing
Where an individual is applying for long term care support either,
residential care or nursing home care, from either Local Authority
or NHS
funding, there are a number of limits relating to their
personal capital. Capital is defined as including savings, investments
and property.
Under section 47 of the NHS Community Care Act 1990, the Social
Services must assess each applicant in relation to their needs
for residential care or nursing home care. This assessment will
determine how much the applicant can afford to pay after taking
into account any state
benefits they are entitled to claim and any other income
they receive less any personal expenses.
If the individual has capital of more than £20,000 in
England, there would be no assistance from full NHS funding
or the Local Authority to fund long
term care costs. To qualify for long term care, full assistance
from the Local Authority is provided if the assets are less
than £12,250 in England. There is a sliding of scale of
support where the assets fall between these levels, for example
in England between £12,250 and £20,000. Partial
funding from the NHS is possible applying nursing
care bands if the individual has assets of more than £20,000.
Where the individual or their
partner are currently ill or have suffered illness in the past
or are a smoker or are overweight, then they could benefit from
an impaired
life annuity that will significantly increase the income
in retirement. The medical conditions they suffer from must
reduce the individuals life expectancy relative to normal mortality tables for the population in order to qualify for higher impaired
rates.
If an individual suffers from a serious illness they can use the pension fund to buy an annuity on retirement that can include an enhancement and it is possible to use an open market option to search for the highest pension annuities. If retirement is due to ill health an impaired health annuity could be purchased. Learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised annuity quote offering guaranteed rates.
The leading causes of death in the UK account for 80% of all
deaths for males and females that are over the age of 50 are
heart disease (37.0%), cancer (24.0%), stroke (12.0%) and major
organ failure (8.5%). Any individual who has survived or currently
suffering from these conditions can be considered by underwriters
for an impaired life annuity.
If the individual is older (possibly over 80 years of age),
suffers a medical condition and is unable to perform a number
of activities
of daily living, an immediate
needs annuity would pay a considerably higher income where
the individual is moving to a nursing home. Other state benefits
could be payable depending on the medical condition and if the
individual's assets are below a minimum level, NHS
funding or funding from the Local Authority would be possible
to help fund long
term care.
Members
pension rights
Within pension arrangements there will accrue the members pension
rights, the value of which will depend on the rules set by the
scheme trustees in the case of an occupational pension scheme.
For these schemes the members pension rights have been greatly
influenced and improved by various pieces of key legislation
starting with The Social Security Act 1973 (SSA
73) and the rights of members leaving
service early. The pension rights of an individual will
not start on the first day of employment if the individual is
subject to a waiting period.
This then will create a difference between the members length
of service and pensionable service. For the rights accrued in
a final salary
pension will depend on the applicable accrual rate of the
scheme, the earnings used to calculate benefits if different
from pensionable earnings and the length of service of the member.
At retirement
age the members rights will pay a pension income with the
option for commutation to a tax free lump sum.
As a result of The Social Security Act 1990, the members pension
rights relating to preserved
benefits were required to be protected against inflation
and linked to the retail price index (RPI) up to a ceiling of
5.0% per annum. The members pension rights for personal
pensions are dependent on the fund value accrued from the
contributions made, investment return and the annuity rate at
the members retirement age. These retirement benefits will be
paid to the member as a pension income where commutation to
a tax free
lump sum is allowed by the Inland Revenue.
At retirement the individual can use the pension fund to buy an annuity and has the option to access an open market option to search for the highest pension annuity. Once you have purchased an annuity it cannot be changed, so learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised pension annuities quote offering guaranteed rates.
