| Previous Section | Index | Home Page |
Mr. Freeman: On behalf of the Lord Chancellor, I can give that assurance. It is not only important to get the legislation right, but it is important to communicate the intentions of Parliament to the judiciary in a fair and impartial way. I take the hon. Gentleman's point.
Pensions can be an important element in the totality of assets, financial and otherwise, that form the basis for an equitable financial settlement between divorcing couples. The Government have already taken a number of steps to ensure that pensions are fully recognised in such settlements.
In the Pensions Act 1995, we clarified the courts' existing duty to take pensions into account in financial settlements, which had not always been recognised in practice. The courts already have the power to order maintenance payments to the ex-spouse, payable from the former partner's income including pensions. But the Pensions Act 1995 extended that power to allow the courts to order a pension scheme to pay the relevant sum from the scheme member's pension, including any lump sums payable, directly to the ex-spouse, when the pension
comes into payment. I take the opportunity here to clear up any confusion on this matter--the courts will not be constrained to order a 50:50 allocation: they will have the flexibility to order whatever allocation or none, as seems appropriate. Those provisions will take effect from July this year.
During the passage of the Bill through the other place, some of the noble Lords argued that the courts should be given the power to split the pension fund itself at the time of divorce--again, not necessarily 50:50. We have always recognised the force of the arguments in favour of pension splitting, especially the contribution towards achieving clean-break settlements.
However, the technical complexities of pension splitting should not be underestimated. Let me mention just two. An occupational pension is deferred pay, and it is the relationship between employer and employee that governs the pension scheme and the related tax reliefs and benefits. If the pension is split, the former wife would effectively become a pension scheme member on an entirely different basis from the other scheme members. The employer's obligations to this new member would have to be defined, making sure that the scheme's tax-approved and, in some cases, contracted-out status was not placed in jeopardy. Similarly, it would be necessary to define the obligations of the pension scheme's trustees and managers and what rights the ex-wife might acquire, including benefits for her dependants.
We must also have regard to the effects on public spending of any changes. It is vital to ensure that former spouses--usually wives--are not able immediately to withdraw their portion of the pensions of members of unfunded public service schemes. Otherwise, that could mean immediate public expenditure costs of up to £500 million a year in the early years. The position of the state earnings-related pension scheme and its interaction with guaranteed minimum pensions must also be safeguarded.
Those are just two sets of complications. There are many others. We have already identified some 30 Acts of Parliament that would need changing. That is why the Government resisted the Opposition's amendment in the other place which sought to achieve immediate pension splitting. Indeed, the scale of the complexity is demonstrated by the fact that the Opposition's amendment, drafted with the help of some of the best minds in the pensions industry, is still defective and insufficient. It fails to give the wide powers necessary to make pension splitting a reality. Indeed, it would be quite unreasonable to take such wide powers before fully working through how they would be used.
We believe that the best way forward is to introduce proposals that are of genuine benefit to individuals, that are workable for pension scheme administrators, and that are affordable for taxpayers. Given the scale of the task, and the importance of getting it right, it is simply not feasible to introduce pension splitting in the Bill. No sensible person would want to foist an unworkable set of provisions on to courts and pension schemes.
The Government accept, however, that pension splitting is right in principle. We will publish a Green Paper in the summer to consult about how it can be achieved, and we will introduce legislation at the earliest opportunity thereafter to put that principle into practice. That legislation will replace or amend the Opposition's
amendment, which does not fully achieve what we assume is the intention and which could otherwise have undesirable and unintended consequences, given its acknowledged incompleteness. As a measure of our acceptance of the principle we will not be seeking to overturn clause 15.
Mr. John Butterfill (Bournemouth, West):
I am reassured by what my right hon. Friend has had to say, but what would be the likely time scale of any new legislation? Much work has been done behind the scenes by those who are concerned about this matter, including the National Association of Pension Funds, the Association of Consulting Actuaries and others. It therefore seems likely that a Bill could be brought forward quite quickly if there were a quick consultation period.
Mr. Freeman:
It will be for my right hon. Friend the Secretary of State for Social Security to commence the process. My hon. Friend the Parliamentary Secretary and I have discussed this matter with Ministers in the Department of Social Security and we will get on with it. The commitment to publish a Green Paper in the summer--probably July--is a firm commitment. I cannot give a commitment as to when a Bill will be introduced, but we agree with the principle and we are leaving the clause in the Bill. We shall issue a Green Paper and we will legislate as quickly as possible thereafter.
Sir Michael Neubert (Romford):
Does my right hon. Friend agree that--on the question of pension splitting--not the least consideration is to come up with a scheme that will provide a deterrent to divorce, not an inducement?
Mr. Freeman:
My hon. Friend touches on an important point--the tax consequences for those who are not married as compared with those who are. That is a matter for my right hon. and learned Friend the Chancellor of the Exchequer. I assure my hon. Friend that he and I are both aware of the issue. I shall draw to my right hon. and learned Friend's attention the comments of my hon. Friend--and I dare say of others--in this regard.
Dr. Robert Spink (Castle Point):
Should people considering lodging a divorce petition and wanting to take advantage of the new pension splitting arrangements delay until after 1 July?
Mr. Freeman:
The earmarking provisions come into effect this July--I refer to earmarking when the pension is paid. That does not necessarily, however, protect the spouses of those who have died. Sometimes a pension may not be in payment so as to be able to be earmarked or split. I can assure my hon. Friend, though, that the provisions will come into effect in July; and that legal advice should be sought from those competent to provide it, not from a Minister unversed in the law of pensions. For further information, my hon. Friend might like to write to me or to the Parliamentary Secretary, and we will endeavour to give him further detailed advice.
Mr. Donald Anderson (Swansea, East):
Given the complexities of the issue the Government should obviously consult further, but am I right in thinking that implementation may not be delayed much in any event?
Mr. Freeman:
I am grateful to the hon. Gentleman for reminding the House of the timetable in which the measure will become effective. It is important not to send the wrong signal about pension splitting. The argument has to do with protecting the legitimate rights of spouses who get divorced but do not enjoy the benefits of a pension scheme. At the same time, we want to ensure that we have thought the subject through--both the policy and the practical implications, direct and indirect.
Sir Peter Hordern (Horsham):
I am glad that the Government accept the principle of pension splitting, but it would seem from what my right hon. Friend has said, and from what some of us already know, that interfering with pension funds and occupational schemes is an immensely complex business. Indeed, my right hon. Friend has mentioned several Acts of Parliament referring to the issue.
Is it not possible, even at this late stage, to consider a scheme that splits the entitlement to a pension between the beneficiary and the original wife or husband, instead of trying to tamper with the pension scheme itself? If we do not do that, I fear that these problems will be resolved in the courts for years to come, so complex are they.
Mr. Freeman:
I am grateful to my right hon. Friend. The courts already have the power to take into account the accrued rights of a pension scheme in the allocation of assets. This July, a further provision comes into effect: the allocation of a pension when it is paid--the so-called earmarking provision. I am agreeing on behalf of the Government to a third stage, which is a logical development: splitting the pension assets themselves. That gives rise to fundamental and difficult problems, and we shall have to consult thoroughly with the help of the National Association of Pension Funds.
I apologise for going on at length. I turn, finally, to part IV, which deals with domestic violence and the occupation of the family home. This part of the Bill substantially reintroduces the provisions of the Family Homes and Domestic Violence Bill, which was before the House in the last Session. Controversial points arose on that Bill at a late stage, and unfortunately the timetable did not allow it to complete its passage in that Session. A number of amendments have been made to the contents of the earlier Bill to clarify the principle that the courts must take into account the difference between marriage and cohabitation when settling occupation orders.
We shall introduce at the conclusion this evening a motion for committal to the Floor of the House of the clauses relevant to free votes.
| Next Section
| Index | Home Page |