House of Commons Hansard Debates for 4 Jul 1995

The Secretary of State for Social Security (Mr. Peter Lilley): Further to that point of order, Mr. Deputy Speaker. As the Prime Minister has received the handsome majority that he sought--a majority larger than that achieved in any leadership ballot bar one for this party, and substantially larger than that achieved by the right hon. Member for Sedgefield (Mr. Blair)--presumably we may expect the right hon. Member for Sedgefield to seek a reaffirmation of his leadership, resign, go to his party and try to succeed in receiving the support that my right hon. Friend the Prime Minister has achieved.

Mr. Deputy Speaker: These seem to be points of political observation rather than points of order.

Mr. Arbuthnot rose --

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Mr. Deputy Speaker: Is this a point of order?

Mr. Arbuthnot: No. I was in the process of intervening on the hon. Member for Glasgow, Garscadden (Mr. Dewar) and got blown off track. In the light of new clause 1(7)--I apologise for drawing us back to pensions and divorce--does he now accept the point that he would be banning the transfer out of public sector schemes, about which he was so indignant in Committee?

Mr. Dewar: No, of course I would not be doing that. I am just trying to be helpful. The Under-Secretary knows how helpful I am on these occasions. If he considers the new clause, he will find that it is a permissive clause that makes such provisions as may be appropriate to meet special circumstances. It is simply that I was seized of the point that the Under-Secretary, who sometimes has a one-track mind, would appear before the House today saying that the unfunded pension scheme liability was so frightening to Ministers in the Department of Social Security that further consideration was not possible. I moved to meet that with a permissive clause, but I have made it clear where we stand. I have argued, I hope with some force, that the £500 million figure is nonsense and that the £300 million figure would largely arise in any event with earmarking as well as with splitting.

I make a final point on financial matters. The Under-Secretary made a point and he incomprehensibly repeated it at some length--I shall read it; no doubt it will read better than it sounded--about GMP and the state earnings -related pension scheme. I shall read to him again from Mr. Malone, to give him an example of at least one person of some knowledge and weight in that respect who does not accept that argument. He says:

"The arguments about splitting SERPS and GMPs are not well-developed."

I am sorry that that is a criticism of the Minister by implication, but never mind.

"To say that SERPS `does not exist' is absurd. It may be unfunded, but the entitlements exist and it is those which are under discussion. GMPs are not an insurmountable problem as we have explained at length, face-to-face with DSS officials. A GMP is a deduction from the SERPS entitlement, and it could continue to be deducted in full despite a divorce settlement. This would not be `an unacceptable burden on schemes' and I do not know that anyone has ever claimed that it was. It is earmarking that it is an unacceptable burden on schemes as everyone has repeatedly made clear to the government."

Mr. Malone expressed that with some force, and perhaps a hint of exasperation.

I say firmly to the Government that, having tried, to the best of my ability, to consider the financial arguments, I do not believe that they stand up in any substantial sense against the social arguments of certainty --to which I referred--and justice and fairness, which at least argue eloquently for the possibility of including splitting among the options.

The argument is, on the whole, familiar to hon. Members who served on the Committee, and I promised that I would not rehearse it over-zealously. I must say, however, that there is a very powerful coalition in favour of at least going ahead with the option that I have discussed.

Fairshares is unashamedly a pressure group, but it has worked hard and fairly to inform its members and itself and to put its case. I pay tribute to that. In addition, I have quoted the PMI extensively. The PMI did the major piece

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of research that is the foundation of the proposals to which the Government have now agreed. Unfortunately, they would not take the further step down the road with the PMI.

The Equal Opportunities Commission has been quoted. It has rightly expressed its opinions clearly. It does not want to find itself in a position where splitting is ruled out--I do not blame it for that. The Law Society of England and Wales, the Law Society of Scotland, the Institute of Actuaries, the Faculty of Actuaries in Scotland, the Solicitor's Family Law Association and the National Association of Pension Funds--and a lengthy and impressive list of other organisations--have all said that the Government have got that matter monumentally wrong, and should be considering splitting.

If that is really so difficult to do--I understand that that is the Minister's position--let me quote what was said by the Pensions Board of Ireland. I do not pretend to be an expert about it, but I have been supplied with the annual report and accounts of the board, in which the board discusses the Family Law Bill, which was introduced in the Irish Parliament in February 1994 and I suspect will now be the law.

The board deals with different approaches to the division of pension rights on marital breakdown available under the terms of the Family Law Bill. They fall into four principal categories. One is pension splitting within the scheme, which we suggest is the answer to the unfunded public sector pension problem. The next is pension splitting by transfer payment:

"A variation of the approach immediately above, and it involves the transfer of an amount equal to the value of the pension rights allocated to a member's spouse out of the scheme to an approved insurance contract or to another pension scheme of which he or she" becomes

"a member."

That sounds like a very simple statement of what we propose. The myriad difficulties do not appear to have stopped the Irish. I have no doubt that there are differences in their system and their social security system, and I do not pretend that I have had time to consider that in detail, but I put that in as a corrective against the way in which the Minister is throwing his hands in the air and saying, "It is impossible."

5.45 pm

I expected that we might end up with Brooks v. Brooks, and I took the trouble, as the Minister did, to equip myself with a copy of the judgment in that contentious case, which ran on for a long time and ended up in the House of Lords.

I do not believe that the Brooks v. Brooks case argues the case for splitting, as the Minister accused me of believing. I do not think that he has heard me speak on the subject of Brooks v. Brooks, and therefore he must suffer from the delusion that he is a thought transference expert. In any event, I do not hold that opinion. Brooks v. Brooks is a rather special case and it is narrow in its application. For a start, the decision does not provide for pension splitting on divorce in a normal case. Brooks v. Brooks, as the House will remember, depended to some extent on whether the specific pension scheme that was discussed was a marriage settlement. In addition,

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the husband and wife were members of the same, very small, pension scheme, and therefore no problem of prejudice to other members of the scheme, or any other complications, arose.

It has been suggested to me that there are some messages from the decision. In the normal case of a wife who has not worked for the same employer as her husband, the case will allow a wife, on divorce, not necessarily to split, but to receive a dependant's pension if, first, her husband's pension scheme is capable of being a marriage settlement--that is one great exclusion--and, secondly, the ex-wife remains a dependant. The latter is not something that we would want to encourage, and is not a case, in these days of women working in the labour market, that will arise very often. Finally, it must not prejudice other scheme members.

I do not believe, therefore, that we can assume that the Brooks judgment is in any way a final word. However, I would urge on the Minister that it gives impetus to the need to clarify the position. If the Government leave the position as it is, in many cases the wife will have an earmarked portion of her husband's pension--assuming that the Bill becomes law--and the question whether her husband's pension arrangements might be the subject of a Brooks order would then arise, to secure a deferred pension as a replacement for the lost widow's pension. That will lead to enormous complication and difficulty, much of which would be removed if the amendments to which I spoke today--or at least their spirit--were accepted by the Government.

One might also draw some perverse conclusions from Brooks. For example, if one is a middle-aged, middle-income executive, one is probably better off in a large company scheme than in a small scheme in which one is the prime figure; but that is another matter. I do not believe for a moment that Brooks settles the issue; indeed, it probably complicates the issue, but, by doing so, argues the case for completing the nap hand of options that should be available to the court in reaching the right decision in the circumstances of an individual case.

I was interested that the Minister quoted the leading judgment, which is by Lord Nicholls of Birkenhead. The Minister triumphantly quoted the last paragraph, but before we reach the last paragraph I shall draw his attention to page 4 of the judgment.

Lord Nicholls reviews the various possibilities with some care. He expresses--I want to make this clear--some reservations about splitting pension rights, but they are rather minor reservations. He suggests that there would be

"significant administrative burdens and expense for scheme trustees; there may be problems over guaranteed minimum payments and protected rights; and there would be major financial implications for unfunded public service schemes."

I concede that he is entitled to refer to all those matters, but that is nothing to the objections that he raises to earmarking. I am surprised that the Minister did not read the passage to us, as he is so keen a fan of Lord Nicholls' prose. It says:

"A second method involves earmarking part of the pension benefit for payment direct to the spouse when the pension comes into payment. This earmarking method suffers from the disadvantages that it would not be a `clean break': payment of benefit would depend on the happening of events some of which would be under the member's control; there would often be uncertainty for some

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years for the former spouse, not knowing when benefits would start or what would be their duration; and in most cases this method would yield nothing for the wife after the husband's death, she no longer being entitled to a widow's pension under the scheme."

That might be a summary of many of the arguments that I have made in the last half hour or so.

If we are going to reflect on Lord Nicholls' opinions, we should take his strictures--not an unfair word--about earmarking, and certainly earmarking as the only way forward, very much into account.

The Minister quoted the final paragraph of Lord Nicholls' speech: "If the court is to be able to split pension rights on divorce in the more usual case of a multi-member scheme where the wife has no earnings of her own from the same employer, or to direct the taking out of life insurance, legislation will still be needed." I accept that entirely: it is exactly what we are trying to do. Lord Nicholls said that that possibility requires legislation. We are trying to supply that legislation through new clauses 1 and 2, which the Minister especially disliked but which were referred to specifically by Lord Nicholls. They were drafted because the Law Society thought that they were right.

I believe that we can by rational argument seriously shake the opposition to these proposals, certainly in respect of the financial arguments. When we come to the social arguments, to what is best for stability in the aftermath and trauma of a divorce and consider someone who may well find herself--it is likely to be the former wife--on her own, it is important to try to provide circumstances where she has certainty and knows that what she has been promised will be delivered, however modest it may be. That is not going to happen with earmarking and there will be many cases in which it will not be possible to accommodate a capital payment from other assets and in which earmarking may seem singularly inappropriate. I believe that the Minister even now should go a little further down the road than he did in his exchanges with the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and make it clear at least that the door is genuinely open to splitting and that the Government accept that there is a strong social case for making arrangements that would allow that.

Mr. Kirkwood: For the past 45 minutes, I have listened with care to the hon. Member for Glasgow, Garscadden (Mr. Dewar), who has dissected the Government's position in a forensic way and demonstrated his well-known skills, especially in respect of the financial aspects. I concur with him. I am also grateful to him because I no longer have to repeat the arguments- -he has deployed them with enough skill to satisfy anyone who has been listening that many questions about the Government's current position remain to be resolved.

As one who did some divorce work as a solicitor before coming to the House, I can say that it was clear to everyone practising such work that the situation was unfair. Things have moved on at some speed during the past 12 or 13 years, and the courts are going to take the issue further than the Government are prepared to take it in a legislative sense if this measure is the Government's last word on the matter.

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If the Government were willing to leave the door open to further reform, there would be a case for reconsidering the problem after the commissioned research had borne fruit and, after they had had a chance to consider it, more sensible provisions could be made. When the Bill was published, I was concerned that the amendments that were tabled in the other place started to tackle the issue as they did. I should have much preferred the issue to have been dealt with in a free-standing matrimonial family Act and separately from occupational pensions, the protection that schemes are now perceived to need and the rest of the burden of the Bill.

Matrimonial disputes are complicated and deserve their own legislation. I came to that view when I was looking at how such matters work out in the courts. I have felt for some time that the courts should be given more discretion to deal with individual circumstances. I do not believe that the straitjacket of a legislative framework can deal with the panoply of ramifications of all the peculiar circumstances that can arise during the dissolution of a marriage.

It is extremely difficult for legislators to cater for everything that can happen when a marriage is dissolved. If judges were given discretion, within a framework of law, to consider all the circumstances, including the cost to the public purse and to other members of the scheme, they could weigh those factors in the balance judicially. I have felt for some time that they should be given proper freedom and discretion and that we should have the confidence to allow the courts to make fair settlements. Case law could be established in that way.

I was interested to hear what the hon. Member for Garscadden said about the Brooks v . Brooks case. I entirely agree that some of the press reporting of that case, certainly in the initial hearings, was misleading. The case involved a very peculiar set of circumstances and no great conclusions could be drawn. The courts should be trusted a bit more and charged with considering the effects on the public purse and on other scheme members. That could permit more sympathetic consideration of individual circumstances when settlements are made. I am nervous about how we have come to be in this situation. I fully understand the frustration felt by pressure groups such as Fairshares. I, too, commend them. They have played an excellent role. We have also been provided with briefing material during the passage of the Bill. I agree with the hon. Member for Garscadden about the role that has been played by the Pensions Management Institute report and Mr. Malone. They have exploded, certainly to my satisfaction, many of the positions that the Government have taken.

I have not yet studied all the Committee proceedings in great detail. I am taking them on holiday to the beaches with me and, in the autumn, I shall be in a much better position to target questions, but the explanation of the financial reasons against splitting seems to me to be wholly bogus and unsubstantiated.

I am grateful to the hon. Member for Garscadden because he effectively demolished the Government's argument that there would be a £500 million a year cost to unfunded public service schemes and tax losses estimated at some £300 million pounds a year by 2037. In passing, 2037 seems a gie long way away. It puzzles

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me how such figures can be conjured up out of the air. If a bolt of enlightenment is to come from the Treasury Bench, I am more than willing to receive it.

Mr. Arbuthnot: I do not know that I have ever described myself as a bolt of enlightenment. I want to correct the hon. Gentleman on the £300 million. The hon. Member for Glasgow, Garscadden (Mr. Dewar) properly and fairly drew attention to the fact that the tax cost had changed. We now consider that the tax cost of pension splitting would be up to £200 million, not £300 million; £100 million is quite an important difference.

Mr. Kirkwood: I am tempted to ask the Minister to explain why the estimate has been revised, but that would perhaps only provoke him. Mr. Arbuthnot rose --

Mr. Kirkwood: I see that it would, so I shall not ask him. There are many questions to be asked and there is a lot more work to be done before I shall be convinced that the financial difference between splitting and earmarking is as the Government allege. What consideration have the Government given to equity between sexes in this argument? If the Government scheme goes on to the statute book, what view will the European Union and the European courts take of the current earmarking proposals? Has that been considered? I should be interested to hear the view of the Equal Opportunities Commission and other interested bodies. I am not confident from a legal point of view that the Government could successfully take a case to the European Court and argue that the earmarking provisions are not inherently discriminatory. I believe that they might fall foul of the European Court. I am certainly persuaded that the provisions for splitting on divorce are far more equitable from a social point of view--and, indeed, from every other point of view.

6 pm

I understand that there are problems but I, too, have considered some ways to get around some of the difficulties that have been suggested by the Government. I should like to think that, if the Government had had longer to work on some of the objections, solutions to them could have been found. If the Government are saying that they will continue to examine the problem and that the current proposals are not the final word, I hope that the research that they have rightly commissioned will lead them to favour splitting and to introduce free- standing legislation that will, of itself, produce the fairness, justice and equity that we believe can be achieved only by a move towards splitting.

Mrs. Jane Kennedy (Liverpool, Broadgreen): I should like to ask the Under-Secretary of State to look carefully at Government amendments Nos. 69, 70 and 71, which amend clause 164 and refer to section 25B of the Matrimonial Causes Act 1973. I know that he dealt with these amendments in his opening remarks, but I have to confess that I did not fully understand the need for Government amendment No. 70, which would appear to be completely unnecessary if Government amendments Nos. 69 and 71 are carried.

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Amendment No. 69 deletes "in the foreseeable future" in line 32 on page 121, and amendment No. 71 deletes the same phrase in a later proposed subsection of the 1973 Act. Amendment No. 70 adds the words:

"and, accordingly, in relation to benefits under a pension scheme, section 25(2)(a) above shall have effect as if `in the foreseeable future' were omitted".

If that phrase is already omitted, where is the need for amendment No. 70? That is the main element of the Minister's remarks that I did not understand. Much of what he said concerned the complexity of the issues with which we have been dealing but, in Committee, we were able to distil that complexity into relatively simple terms and I managed to follow most of what was said. I have not, however, understood the reason for amendment No. 70.

Mr. Arbuthnot: The reason for the proposed change is that we want to remove the words "in the foreseeable future" only in so far as they apply to pension schemes to which they are not appropriate. The amendment to section 25 of the Matrimonial Causes Act 1973 would therefore not remove those words in relation to any other types of asset.

Mrs. Kennedy: I am sincerely grateful to the Minister. He has cleared up what, to me, was a puzzle.

We can also distil into relatively simple arguments the complexity of what divides us. There is no difference between us on the principle that pensions are assets that can be split; the real difference relates to when we think that split should take place, which is why we have come to use jargon such as splitting and earmarking.

The Minister referred to the case of Brooks v . Brooks. The importance of that case has already been explained by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). The House of Lords' ruling means that the courts have the power to order the payment of part of an individual's pension to a divorced spouse. There is no intention on either side of the House to diminish the importance of that ruling, although the Minister has tried to underplay its importance. This is the first time that it has been found that pension benefits can belong to someone other than the scheme member for whom they are intended.

As I understand it, the courts in England have the power to compensate a divorced wife for the loss of expected pension benefits, but they are not allowed to vary pension schemes by splitting pension rights between the parties. The facts of the case of Brooks v . Brooks are recognised as unusual, but the Financial Times reported last Friday:

"Solicitors for Mrs. Brooks said . . . that the judgment was likely to set a precedent for division, at divorce, of personal pensions, most of which also are single-member plans paying benefits based on contributions.

Mr. Norman Russell"--

the solicitor in question--

"said: `It is hard to see that there is one law for the wife whose husband bought an executive pension and"

another for

"the wife whose husband bought a personal pension'."

There is no doubt that the argument will continue and that the courts will continue to make decisions. We should be failing if we did not help the courts to arrive at fair and equitable decisions.

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One of the problems with the Bill is that it allows only the earmarking of pensions at divorce and dismisses the benefits of splitting. Under earmarking, divorcees are left entirely dependent on their ex-partners. It is only when a scheme member draws the pension that part of it is paid to a divorced partner. If that pension is drawn early, the divorced partner gets less than expected. If it is drawn later--if late retirement is taken--the ex-partner will have to wait for a share. If the scheme member dies before retiring, the ex-partner get nothing at all. The injustices of that will continue to be questioned by the courts. It is therefore right and proper that we now consider a solution which would assist the courts to arrive at fair and equitable decisions.

The Bill supports earmarking despite the recommendations of the Pensions Management Institute which, in May 1993, published the report of an independent working group that investigated in depth the issue of pensions and divorce. Despite Government claims to the contrary when the Bill was considered in the House of Lords, the PMI argued--and continues to argue-- that its report was supported by the Law Society, the Society of Pension Consultants, the Association of Consulting Actuaries, the Institute of Actuaries and the Faculty of Actuaries. In passing, I have to say how much members of the Committee owe to the actuaries for their assistance with some of the complexities.

The PMI argues that its report came up with solutions that are practical, workable and effective. The report came out in favour of splitting pensions at divorce rather than waiting until the retirement of the partner who was a member of the scheme, thus allowing a full, clean break on divorce. It is worth quoting at length the PMI's memorandum which was submitted to the Select Committee on Social Security and appears on page 106 of the Select Committee's report. It states:

"We believe there are political motivations behind the Government's reluctance to make more fundamental changes in this area and we find this profoundly disappointing. In recent years the pensions industry has been accused of failing to be innovative and failing to keep pension scheme provisions in line with changing social needs and attitudes. Here we have an example of the industry (and the legal and actuarial professions) taking the lead only to meet a refusal from the Government to implement the recommendations. We believe it is critical to sort out pensions on divorce urgently because of the social ramifications. Furthermore, it will not be long before questions to do with pension rights between partners in relationships other than marriages become a legal, not to mention a social issue."

We have gone into the problems of earmarking at length but they bear further consideration. The ex-partner would receive benefit only when the member retired and receive nothing if the member of the scheme, their former partner, died before retirement. The divorcee would therefore be required to keep track of their partner over a number of years when all that they wanted was a clean break. Divorce practitioners believe that a break is desirable so that those concerned are free to go their separate ways without being financially dependent on each other.

If the scheme does not require a direct payment of the earmarked sum, the ex-partner might have to use the courts to enforce the rights under the earmarking agreement. The costs of that--to both parties--are obvious. The only people who would benefit from that are lawyers, with all due respect to all hon. and learned Members present.

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Another problem with earmarking is that, although divorcees would obviously have an interest in the financial performance of the scheme, how the pension was reinvested, and so on, they would have no say in any decisions because they would not be members of the scheme. They would be linked to the scheme only through their former partner. Scheme members could face difficulty on leaving a job and transferring their pension rights if they were earmarked in a divorce settlement.

There would be uncertainty about the level of retirement income, so it would be difficult for both parties to plan ahead. As I have already said, if the scheme member dies, former partners could have no income at all for their latter years. That would be a particular problem for women, as we tend to outlive men.

There are several benefits of splitting: most important, it would allow a clean break. Divorcees could begin their lives again without continuing to be reliant on each other in any way. It would also allow the courts to reallocate other assets without complicating the value of the pension and ensure that both parties had their own entitlement to their own retirement benefits.

I want the Minister to reconsider new clause 1, which is extremely constructive. It does not say that all pensions should be split at the point of divorce. At proposed new section 24B(3)(a), new clause 1 would allow for a lump sum to be paid to a partner if that was what the court determined and if it made an order to allow it. Paragraph (b) would allow the administrator of a pension scheme to treat the former party of a marriage as a member of the pension scheme in relation to such benefits as may be specified. The former partner would therefore become a full member of the scheme. Paragraph (c) would allow the administrator of the pension scheme to make such a payment into any other pension scheme that may be appropriate. There are throughout new clause 1 a range of options for the courts or the administrator of a pension scheme. In each case, it would be possible for the courts and the administrator to determine exactly the best outcome for the two partners.

I know that there are difficulties with many of the solutions, just as there are with the earmarking solution that the Government have opted for. In new clause 1, proposed new subsection (4) allows for safeguards in that the administrator of the pension scheme would be able to present to the court a reason why any of the solutions being suggested should not be adopted. Paragraphs (b) and (c) in particular would allow the former partner to be brought into the scheme as a full member or allow payment from one pension scheme into another. Proposed new subsection (7) would allow a safeguard for unfunded schemes by enabling the Secretary of State to introduce regulations which may be appropriate when it was felt that an unfunded scheme could not or should not be part of the settlement.

Will the Minister reconsider those points? I am not satisfied with the case that he has made against splitting on divorce. The new clause would allow the courts to choose the best solution for the two people before them when determining divorce settlements. That is the best solution for everybody and I commend new clause 1 to the House.

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6.15 pm

Mr. Harry Cohen (Leyton): I have tabled amendments Nos. 3, 4, 5, and 6 and new clause 15. I also rise to support the amendments in the name of the official Opposition--excellently explained by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar)--especially new clause 1, which puts the case for pension splitting within the scheme and, at the discretion of the courts, via transfer values to the ex-spouse of the pension fund member.

I note that the Minister will review the matter in the light of research. Indeed, he was cautious in replying to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) about whether such a review would reveal a need for further legislation. I suspect that, when the Government receive the research, they will need to introduce further legislation and move toward a pension-splitting approach, as has been suggested not only by Opposition Members but by many expert organisations. I also suspect that, by relying on the research, the Government are kicking the whole matter into touch, and that further legislation will probably have to be introduced by a Labour Government after the next election.

The mere fact that amendments and new clauses have been tabled on pensions relating to divorce is a triumph for fairness, and a victory for the campaign to recognise the issue in the Bill. To begin with, the Government did not envisage dealing with the matter of dividing pensions in the event of divorce. I am pleased to have played my part in the recognition of the problem and bringing about change. I introduced two ten-minute Bills on the subject: one at the end of last year and one earlier this year, which greatly raised the profile of the issue.

An excellent campaign has been organised by Fairshares, a working party of the Pensions Management Institute has produced excellent reports, and I pay tribute to the work and achievements of Baronesses Young and Hollis in the other place in tabling an amendment on the subject.

The Government accepted the principle of the amendment, although I do not know whether they were dragged kicking and screaming to that view. Perhaps that is a rather ungentlemanly thing to say, so instead I shall praise them for at least accepting the principle, realising that there was an issue to face, and accepting that changes needed to be made to ensure fairness for ex-wives, who are badly treated under the current law and often do not get a share of the ex-husband's pension.

Nevertheless, my hon. Friends and I remain concerned, because the way that the provision is implemented could lead also to unfairness in the system. The earmarking method chosen by the Government, against all the advice from the experts, could result in unfairness. I have read the Hansard report of the Committee proceedings. My hon. Friend the Member for Garscadden asked whether I did not have better things to do with my life. He made an excellent speech in Committee on pension splitting on divorce, and he has done so again today.

In Committee, the hon. Member for Antrim, South (Mr. Forsythe) asked whether the Government were not in danger of following the path of the Child Support Agency by making a mistake in their choice of how to implement the legislation. The principle is good, but if the implementation is wrong, that could lead to unfairness and the Bill would have to return to the House for

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clarification. That would have cost implications. It would have been better to follow the reports of the Pensions Management Institute and the Goode committee.

On 30 June, The Independent described the Government's approach as "a strange mish-mash." It said that the Brooks v. Brooks case, which has been mentioned today, had made the Government alter their original intentions. Doubt has been cast on the overall effect of the Brooks case, and I agree with that. For example, The Independent said that a number of women would be

" entitled to a share of their former spouses' pensions at retirement. They can claim this even if the partner dies before reaching retirement age."

I am not at all sure that that is a consequence of the Brooks case. Indeed, my understanding is that Mr. Brooks is still very much alive, so I do not see how The Independent can make that judgment. As my hon. Friend the Member for Garscadden said, the Brooks case was narrow, and there were special circumstances, as Mr. and Mrs. Brooks were the only two members of the personal pension fund. Because of that, Mrs. Brooks had a right that would not necessarily apply to other spouses with a range of different circumstances. I certainly do not think that the right would apply if the partner were to die, which is why I have tabled my amendment.

If a member of a pension fund dies, that should not negate the right of the ex-spouse to his pension, which should have been guaranteed at the time of the divorce. If, subsequently, the member of the pension fund inconveniently dies, the ex-wife should not lose her rights. I do not think that the Brooks case resolved that problem, as The Independent maintained, although I shall be interested to hear the Under-Secretary's view. If it does not resolve that problem, I hope that the hon. Gentleman will reconsider my amendment, which would.

I want to press the case for pension splitting on divorce. Many of the expert organisations support that, rather than the Government's earmarking approach. I want to draw the attention of the House to two documents. May's edition of "Parliamentary Brief" carries an article by Stewart Ritchie, the director of pensions development for Scottish Equitable. In an article entitled "A Prescription For A Messy Divorce"--which in itself sheds some light on the Government's proposals--he states:

"The government's proposed answer is for the court to make an order which will oblige the pension arrangement to pay a proportion of the relevant pension to his ex-wife when he retires."

That is the key point. He continues:

"However this is contrary to the conclusions reached by the Working Group appointed by the Pensions Management Institute in its widely acclaimed report of May 1993, and the government's approach has been greeted with dismay by many parts of the pensions industry."

The article then gives a number of reasons for that dismay, such as the fact that the ex-spouse will have no control over her pension arrangements subsequent to the divorce.

Mr. Ritchie asks what would happen if the member of the pension fund deliberately postponed his retirement out of spite, to delay the ex-wife access to her share of the pension. That point highlights the unfairness that will arise out of the Government's approach. If we must have earmarking, the ex-wife should be able to exercise her

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right on her retirement, rather than her ex- husband's. He should not be able to postpone his retirement out of spite. Mr. Ritchie was referring to a key point in my amendments--that the pension fund member may leave pensionable service and die before retirement. His pension would then die with him, as would the ex-wife's entitlement to her share. That would be unfair.

Mr. Ritchie stated:

"The PMI Working Group approach is to allow the ex-husband and ex-wife to agree a clean break using other assets if feasible . . . If this is not feasible, a transfer value can be paid . . . The ex-wife is then in charge of her own pension destiny."

That is the approach favoured by the Opposition.

Mr. Ritchie concluded:

"If there is a political will for a clean break, it can be done, and it would be less messy than the current proposals."

That is an expert opinion.

The other document comes from the PMI. It is a press release dated 13 June, headed "Pensions and Divorce: is Disaster Looming?" It quotes Mr. Richard Malone, the president-elect of the PMI, as saying:

"The hopes and expectations of thousands of divorcees will be badly let down if the present provisions for pensions on divorce are not changed as the Pensions Bill goes through the House of Commons. The PMI has been pressing for divorcees to be allocated a pension of their own as part of the divorce settlement; a pension which they can control themselves and around which they can plan their own financial affairs and independence."

The press release continued:

"Only when the scheme member decides to draw pension will part of it be paid to the divorced spouse; if it is drawn early, the ex-spouse will get less than expected; if retirement is deferred, ex-spouses will just have to wait for their share; if the scheme member dies before retiring, they will often get nothing at all." Mr. Malone said that those are "fundamental flaws" in the current proposals, and concluded:

"Further complications arise because between the divorce and the time of retirement the scheme member may transfer the pension . . . Divorcees will have no say in any of these decisions despite the fact that they have a substantial interest in the form that the final pension takes and in the financial security of the investments." That is a pretty scathing criticism of the Government's earmarking approach, and there are arguments in favour of going down the road that the Opposition propose, of pension splitting. If the Government are insisting on earmarking, they should address the flaws and tackle them, even at this late stage.

6.30 pm

In my amendments, I propose to give the Government an opportunity to ameliorate at least some of the worst effects of their proposals. My amendments relate to four main areas, which I shall now go through. Amendments Nos. 4 and 5 talk about the date when the legislation should be enacted. The fundamental point behind my amendments is that they should come into force on the day that the Bill receives Royal Assent.

In Committee on 22 June, the Minister said:

"We are talking about orders made after April 1996 for pension rights accruing after April 1997 . . . If the divorce proceedings have started now, but have not concluded by the time that that time scale comes into effect, they will be affected in the ordinary way."

Mr. Arbuthnot: I should correct a word that I used in Committee and which the hon. Gentleman referred to in his quotation. I said "accruing" when I should have said "paying". I am sorry to be pedantic.

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