(CETV) is paid to a qualifying arrangement at any time up to one year before age 65. Paragraph 6 (1) of Schedule 5 of the Welfare Reform and Pensions Act 1999 sets out qualifying arrangements for the destination of a Pension Credit. These are:
a) an occupational pension scheme, b) a personal pension scheme,
c) an appropriate policy of insurance or annuity contract, d) an appropriate policy of insurance, and
e) an overseas arrangement within the meaning of the Contracting- out (Transfer and Transfer Payment) Regulations 1996.
76. Part IV of Annex 9 provides further details on transfers out to a qualifying arrangement.
77. Where a Credit Member stipulates at the outset that he / she wishes to transfer the value of the Credit to a qualifying arrangement the sum credited to the Credit Member is payable to the qualifying arrangement (less any charges). If, however,that transfer out is not paid until after the end of the "implementation period", the transfer payment shall be the sum credited to the Credit Member as at the "valuation date" plus interest at the rate of 1% above base rate between the original “valuation date” and the date of payment to the qualifying arrangement (less any charges) or, if greater, the sum that would have been credited to the Credit Member if the “valuation date” had been the day on which the payment to the qualifying arrangement is made (less any charges) (see regulation 18 of the Pension Sharing (Implementation and Discharge of Liability) Regulations 2000 [SI 2000/1053].
78. Where the "ex-spouse" is formally granted a Pension Credit in the LGPS during the implementation period and after being made a Pension Credit member subsequently wishes to transfer the value to a qualifying arrangement (even if the date of the request still falls within the implementation period), the normal transfer rules and time limits apply e.g.
• a CETV has to be calculated within 3 months of receipt of request and supplied to the "ex-spouse" within 10 "days" of the
calculation date (the Guarantee date); • the CETV must be guaranteed for 3 months;
• the Credited Member has 3 months from the calculation date to opt for the guaranteed transfer value to proceed;
• payment following an option to proceed must be made within 6 months of the calculation date (otherwise the greater of the original CETV plus interest at the rate of 1% above base rate, or a new CETV calculated at the date of payment, will have to be paid); • only one free quote is allowed within a 12 month period;
• the "ex-spouse" cannot request a transfer if he / she is within one year of age 65.
79. The transfer is calculated using the factors in Tables 4 and 5 at annex 5.
79A. When a Pension Credit member decides to transfer her/his Pension Credit to another scheme it is necessary to split the transfer value in
respect of the Pension Credit between “safeguarded rights” (derived from that part of the scheme member's CETV that related to GMP and / or Section 9(2B) rights) and the “non-safeguarded rights”. GAD have advised that, going back to first principles, any CETV from the LGPS (whether calculated for sharing or other purposes) may be divided into four parts, each expressible in cash terms (and whose total is equal to the amount of the CETV) as follows:
1) Section 9(2B) part: calculated by applying the CETV tables and methodology to benefits accrued post 5/4/97 (including increases to date)
2) Post-88 GMP part: calculated by applying the relevant protected rights factor to the accrued and revalued post-88 GMP
3) Pre-88 GMP part: calculated by applying the relevant protected rights factor to the accrued and revalued pre -88 GMP
4) Pre-5/4-97 non-GMP element: calculated by deducting 1), 2) and 3) from the total CETV.
The "safeguarded percentage" would then be determined as the sum of 1), 2) and 3) divided by the total CETV x 100.
Note that, in practice, for the purposes of determining the
safeguarded percentage, it may be simpler to work on the basis of a CETV (and its 4 constituent elements) unadjusted for market
conditions, rather than to market adjust each constituent individually.
As an example, take a member's CETV of £50,000, of which £10,000 is the combined value of pre and post 88 GMPs and
Section 9(2B) rights. Let's assume the courts have ruled that 60% of the CETV must be used to establish a credit to the ex-spouse. The value of the credit is thus £30,000, and it follows immediately that the value of the safeguarded component must be £6,000.
The above calculation would give you the “safeguarded
percentage” at the point of the initial pension split i.e. 20%. If the ex-spouse chooses to transfer out some time later, the CETV in respect of her Pension Credit may be different as may be the cash value of the safeguarded rights element within the CETV. However, as long as we have worked out the proportionate value of the split between safeguarded and non-safeguarded rights at the date of the pension split we can then apply that same ratio to the later transfer out because both elements, safeguarded and non-safeguarded rights, will have subsequently been increased by the same amount of Pensions Increase - i.e. non-safeguarded rights and safeguarded rights (unlike GMPs) are both subject to full PI.
It will be necessary for GAD to issue protected rights factors for members aged 60 and over.
79B. Where the Pension Credit is derived from an LGPS pensioner member, and so there is no lump sum attaching to the Pension Credit, the administering authority should provide the receiving scheme with a NIL lump sum certificate.