Commentary on Sections Application of the rule against perpetuities Section 2: Exceptions to the rule’s application
38.Section 2 provides for certain general exceptions to the application of the rule against perpetuities (subsection (1)).
39.Subsections (2) and (3) replicate pre-Act exceptions to the rule against perpetuities. The subsections apply in certain circumstances where provision has been made for property to pass from one charity to another. Subsection (2) applies where a charity is granted an estate or interest in property with a gift over to another charity on the occurrence of a specified determining event. A “charity” is defined by section 1(1) of the Charities Act 2006 as “an institution which is established for charitable purposes only and falls to be subject to the control of the High Court in the exercise of its jurisdiction with respect to charities”. In the 2006 Act, “institution” means “an institution whether incorporated or not, and includes a trust or undertaking” (section 78(5)). For example, land is given to be held on trust for charity A but, if charity A ceases to require the land for its charitable purposes, the land is to pass to charity B. The rule against perpetuities does not apply to charity B’s estate or interest. The same result follows if the gift over is for charitable purposes rather than to a named charity.
40.Subsection (3) applies where property is given to one charity subject to a condition subsequent, with a provision that, if the condition is broken, the property shall pass to another charity. For example, a painting is granted on trust to charity A on condition that it is displayed to the public, but to charity B if charity A breaks the condition. Charity B’s right to claim possession of the painting is not subject to the rule.
41.Subsections (4) and (5) together define the exception from the rule against perpetuities for interests and rights arising under relevant pension schemes as defined in sections 1 and 181 of the Pension Schemes Act 1993 (section 20(4) and (5)). The basic exception is described in subsection (4) as covering interests and rights arising under such pension schemes.
42.Subsection (5) removes from the ambit of subsection (4) interests and rights arising under two types of private trust created in respect of property subject to a pension scheme. These are defined as interests and rights arising under an instrument (a) nominating benefits under the pension scheme or (b) made in the exercise of a power of advancement arising under the scheme. By way of example of the first, a member may make a nomination binding on the pension scheme trustees for a trust to be created with certain pension benefits in favour of a nominated person (typically death in service benefits). The interests under the trust are subject to the rule. An example of the second is that pension scheme trustees may exercise a power of advancement to make capital payments to trustees in favour of relatives of a member before any entitlement to a pension arises. This capital sum may be settled in such a way that it creates successive interests. These interests are also subject to the rule against perpetuities.