Examination of witnesses (Questions 300
- 319)
WEDNESDAY 15 JULY 1998
MRS
HILARY
SIDDLE,
MR
ROBIN
ELLISON
and MRS
DIANE
BURLEIGH
300. Yes.
(Mrs Siddle) We have not done any work on that.
301. You can understand that there might
well be standard procedures that could be developed, forms and
such like, to reduce costs?
(Mr Ellison) There seem to be costs in a number
of areas. One is obviously the charges which the pension funds
make which is not what we are capable of discussing today. One
of the charges is the cost of advising clients on the complexity
of it. A number of Members of the Committee this morning have
referred to the complexity of the legislation. I know it is not
directly to your question, but I wonder if I might just raise
a couple of points on the complexity. The first is, as Hilary
mentioned, we do welcome the opportunity to discuss a draft Bill.
I think this is the first time it has been done. Secondly, it
is very helpful to have the accompanying discussion documents
which explain how it is done. That is the good news. The bad news
is that it is very complex. Normally, the legislative process
in Britain has been that we have very detailed legislation but
that ancillary documents, what are known in France as travaux
préparatoires, are not considered relevant. The system
in Europe is different. Their legislation is very short and simple,
but you can refer to the preliminary documents. There are pros
and cons for both systems. What we seem to have in this process
is very complex legislation and preliminary documents as well.
Chairman
302. When you say "preliminary documents",
are you talking about the draft Bill and the regulations that
have been published or other material too?
(Mr Ellison) The material that has come as a bundle.
In other words, there is a draft Bill with explanatory material,
plus an introductory booklet and, in due course, there will be
a debate through the Houses.
303. Is it your professional judgment that
you think that courts in future might look behind what is done
and said in the face of the Bill and the regulations to the preliminary
documents as well?
(Mr Ellison) This is the Pepper v Hart
question?
Chairman: Yes.
Mr Leigh
304. That refers to debates of course but
you are referring to documents as well.
(Mr Ellison) In real life, the advisers to the
parties, if there is an ambiguity or discussion about what a particular
section means, will look.
Mr Wicks
305. You should not look at the draft if
the draft is then amended. You look at the final document.
(Mr Ellison) They will look at the intention behind
the legislation.
Mr Wicks: I think
you are misunderstanding the process. We are testing the intention
at the moment.
Chairman
306. These are important questions. If it
is your professional judgment that there are circumstances where
a court could actually look at preliminary, not just the Pepper
v Hart Hansard context of ministerial statements, then we
should know about that. You have had a lot of experience in this
field.
(Mr Ellison) I know in previous transcripts there
has been discussion of a case called Landau. In the Landau
case, they actually referred to something called the Millard Tucker
Report which was a 1954 or 1952 report. These documents are referred
to in practice.
307. If that is your view, that is very
interesting. I interrupted you.
(Mr Ellison) What we thought we might explore
this morning, just very briefly, was whether or not we need to
have this kind of complexity of legislation when other countries
seem to manage it in much shorter form. I have done a study some
years ago and I refreshed my memory last night, looking at some
other countries' legislation, on how they do very similar kinds
of things.
Mr Leigh
308. On pension splitting?
(Mr Ellison) Yes. In a number of jurisdictions,
South Africa, the States, the Netherlands, they do it in a page
or two. We seem to take 50 pages for the main pensions sharing
Bill, ten pages of legislative changes and there are regulations
to come. The broad, rough estimate is 75 pages of legislation.
The question which arises is whether (a) it is needed and (b)
whether we could do it in a simpler, more straightforward form.
Chairman
309. I understand that you have been slightly
more sceptical about the principal of pension splitting on divorce
in the past.
(Mr Ellison) Your briefing has been very thorough.
310. Are you saying that you have some concerns
about the actual principles concerned?
(Mr Ellison) No.
311. You have accepted the need for the
change?
(Mr Ellison) Absolutely.
312. But you are talking about the way it
has been done?
(Mr Ellison) Pension sharing is just a tool for
the court like the other tools it has such as earmarking or offsetting.
I do not have an objection to the tool. It is public policy; it
has been accepted and I do not have a quarrel with that. Where
we do raise an eyebrow is on the process of the drafting and whether
it needs to be as complex as this particular document is.
313. How would we, as a Committee, start
looking to find the one side of A4 that would enshrine the principle
in order that the complexity could be confined to Statutory Instruments
or whatever?
(Mr Ellison) Far be it from me to usurp the function
of the Parliamentary Counsel.
314. It was not an offer you were making?
(Mr Ellison) I am sure, perhaps outside this room,
we could discuss this and produce as examples overseas legislation.
It is not useful verbatim; they are in a different culture and
a different jurisdiction. Nonetheless, it shows it can be done.
Mr Leigh
315. We need not discuss it outside this
room. It is very easy for us to share with you the draft legislation
of these other jurisdictions or the actual legislation. I think
it is an important point that we can make. Perhaps it is too complex
to explain but I do not know how you can have all this in a two
page Bill or a two page Act of Parliament. Do you want to tell
us briefly how it works?
(Mr Ellison) It works in non-common law jurisdictions
by setting out statements of principle rather than statements
of detail. The courts and the parties are expected to understand
what is behind that. It is developed in case law after that. In
common law jurisdictions like the United States, they take a more
robust approach to drafting because they have plain English rules
and legislation. They seem to manage to do it reasonably comfortably.
They do have, as the second half of the first point—and
I would like to echo some of the earlier evidence on this—the
view that some of the detail should be by regulation. There is
always a big debate about whether the stuff should be in regulation
or should be in the Bill or the Act. There are some problems with
the detail but, as I understand it, there is not contention on
the purpose of this Bill. It is generally accepted across the
board that the pension sharing principle should go ahead. The
problem is, in a Bill of this very significant complexity, there
are bound to be errors, as there have been in previous statutes.
Correcting those errors, which will not emerge until the practice
starts to develop, would be much harder than if it was done by
regulation. In complex Bills, the feeling I think generally and
the impression is that the detail should be by regulation and
that, if there are errors and difficulties in practice, they can
be managed quite straightforwardly; whereas to try and amend an
Act is very hard work.
316. Thank you for that. It would certainly
set the cat amongst the pigeons if we suggested to government
that they reduce a Bill to two pages. That may put it into plain
English which would go against 1,000 years of parliamentary tradition.
I just want to go back to costs for a moment before we pass on.
In your letter to us you say at (b)(i): "The costs which
individuals may face—this may make pensions sharing inaccessible
for many people." We may have gone over this, but is there
any more advice you can give us about how Parliament can control
or restrict the cost to individuals or do you think we have covered
it adequately?
(Mrs Siddle) I think there are two issues. One
is the cost of getting information from the pension funds. At
the moment, we do have to obtain valuations when we are considering
pensions and there are also costs involved in earmarking which
the profession has to find out about. There does not seem to be
any system across the board. There seem to be some great variations
in costings which the pension funds charge. We are concerned about
costs in the future because we understand, from the evidence which
the industry has given, that there are some people who are concerned
that there will be very large costs. I understand they are not
willing to give any sort of estimate of costs. Certainly our experience
is at the moment that the costs vary widely. That is something
of a concern. We are not certain in future who is going to regulate
these costs, whether it will be the courts or the Pensions Ombudsman.
It is not clear from the legislation who the final arbiter would
be. Then there are the actual costs of splitting, which are other
costs which are not known at this time.
317. Perhaps we could come back to that.
That is very important as far as the public is concerned. As a
last, slightly more technical question, sales commissions on pension
transfers are typically five per cent of the cash equivalent transfer
value. If you have a £100,000 CETV, £5,000 goes to the
broker or lawyer and £95,000 to the member or spouse. How
can divorcing couples therefore be assured that pension sharing
transfer value commissions will not be automatically taken up
to provide an offset for legal fees?
(Mrs Siddle) Solicitors are not permitted to keep
commissions. Other financial advisers may be, but we are not.
Chairman
318. Can we turn to the implementation process
with two questions from me? There have been some varying estimates
made available to the Committee about how much the existing powers
of the courts have actually been used in terms of earmarking and
attachment orders. Do you have a view about how useful they are
and how they are constructively or otherwise used in the present
context?
(Mrs Siddle) We have tried to find out how many
orders have been made and it is extremely difficult. Even when
speaking to the judiciary, nobody seems to have a clear idea because
we do not have a central register of orders at all, as I am sure
you understand. Anecdotally, from the members of the Family Law
Committee, few earmarking orders have been made, we believe.
319. Can I turn to retrospection? There
are some concerns about that that we have heard from other witnesses.
Do you have any views about that at all?
(Mrs Siddle) I think we do. I do not think we
would want this legislation to be retrospective.
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