Examination of witnesses (Questions 500
- 519)
WEDNESDAY 16 SEPTEMBER 1998
MRS
SALLIE
QUIN
and MRS
MARY
SINFIELD
500. So there has been some close consultation?
(Mrs Quin) Yes, indeed. We took a slightly unorthodox
step with the evidence to the DSS in that we asked our members
to write direct, so that the DSS could see straight from the horse's
mouth the problems that people could foresee.
501. Were you able to co-ordinate copies
of that correspondence? Did you get sight of what people were
saying direct?
(Mrs Quin) Not all of them, no, but some. We felt it
was fair to our members that they should have their own voice.
Chairman: Yes, right.
You were making some very important points why most divorces are
instigated by women. I am going to ask Edward Leigh if he could
pursue the examination in that direction.
Mr Leigh
502. Do you think the State has any role
in trying to prevent marriage breakdown, or should have an increased
role?
(Mrs Quin) No. I think it should have an increased role
in making sure that there is a fair result when there is a breakdown
of marriage.
503. That is a very clear answer. You talk
about clean break settlements in your paper. You say they have
no place in the divorce settlement if there are children involved.
Are you in favour of Mesher orders which can be used to postpone
the sale of the house until the children are grown up?
(Mrs Quin) Very much so, yes. In fact, I would like to
take that further and suggest that if the wife was going to be
allowed to stay in the house until the youngest child has completed
full-time education, then there will be a valuation put on the
house. Now it seemed to me that this would be a very sensible
time also to value the pension, so you are getting a contemporary
evaluation of the two main assets.
504. That is quite interesting. I am not
sure we have heard that before. You would get a delayed valuation
of the pension perhaps many years after the divorce then?
(Mrs Quin) Yes, at the same time as you are going to
get the valuation of the house. So what you are getting is a deferred
clean break, in effect.
505. Not being expert that seems quite sensible
because the house is the major asset involved and one has no idea,
when the divorce takes place, what is going to happen to house
prices over the next ten or twenty years. If we are talking about
a relatively young couple, presumably you are saying there is
no rush?
(Mrs Quin) Exactly so.
506. That is something we might look into
because that seems quite a good point. Following on from that,
do you think the courts somehow have to develop some sort of mechanism
for looking, not at the present, but at the future prospects of
each spouse? That is what is absolutely vital.
(Mrs Quin) Yes, definitely.
507. So it is going to be very difficult,
talking about a pension, to determine this maybe at the time of
the divorce, if we are talking about a couple in their 30s.
(Mrs Quin) Yes. It also builds in a bit of security for
both parties because house prices are subject to market forces
and the value of a house can go up in the intervening period.
Alternatively, the pension can go down, and if it is not performing
very well that will afford the husband some protection.
508. I have constituency correspondence
myself about this. Somebody was aggrieved because their settlement
was based on a house valuation which, of course, had gone up since
the settlement; so that is a fair point, we will look into that.
May I refer you to paragraph 1.4 of your paper, the five elements
of pensions and ancillary benefits which may be lost. Do you think
that special provision should be made to retain for the former
spouse, at least part of the insurance on the member's death?
We are talking about death before retirement.
(Mrs Quin) Yes.
509. Of course, this might affect your earlier
answer. I do not know how that would work if somebody died prematurely.
(Mrs Quin) Under earmarking, the courts have provision
to order that the salary earner nominates the spouse as the beneficiary
on their death. The importance of that is that most people have
a mortgage, or they have something that needs to be paid off with
a large capital sum. By not having any large capital sum coming
in, we feel it is putting people at risk.[1]
Mr Leigh: Okay, that
is fine, thank you very much.
Chairman: Can we talk
now about transfer values, a very important part of the whole.
May I ask Gisela Stuart if she will continue the questioning in
that area, please.
Ms Stuart
510. It is welcome to see you again. I am
delighted that Fairshares has the opportunity to talk to us. CETV
values: in your submission you say yourself that it may not reflect
the true value of the benefits. Having said that, would you nevertheless
agree that it is probably the most easily accessible, albeit unsatisfactory,
value that we have? Or to what extent would you propose to specify
what elements should be included?
(Mrs Quin) I accept that it is an easily accessible valuation
but I think that it is a valuation which should be used as a basis—no
more and no less. The widow's benefit is very important because
women do live longer than men. Basing it on the CETV, everyone
is looking at it as same sex pension, whereas in reality they
are not same sex pensions because women are going to live longer.
Therefore, if you shrink the amount of money you are going to
be given at the very beginning and then you are going to stretch
it farther, obviously they are going to lose out. We feel that
this should be addressed.
(Mrs Sinfield) The other point about cash and transfer
value, as far as I understand it, is that the basis is not the
same within all funds. So what would be required, in regulations
at least, would be to ensure that the basis was solid to start
from. But the other problem with cash equivalent transfer values,
aside from the double whammy effect that Sallie has already mentioned,
is that there will be circumstances in which cash equivalent transfer
value is not a valid basis from which to start, when you have
circumstances in which there is likely to be greater longevity
of the male than the female, because the wife might have MS or
something like that. Under those sorts of circumstances you really
need an alternative provision. As I understand it, at the moment,
the Bill is not allowing any alternative provision at all.
511. It is very useful because we have had
in previous evidence sessions this double whammy instance, where
women are disadvantaged by the way the value of the transfer value
is judged to begin with, and then what the size of the pension
will buy them to invest in, so that they lose out at both ends.
(Mrs Sinfield) Also, there is the question of the discretionary
benefits as well.
512. One of your strengths as an organisation
is that you are probably more in touch with real-life cases. Do
you think you can give us some examples which you have come across,
where the exclusion of discretionary benefits will cause hardship.
(Mrs Sinfield) May I give you my own case. Both my husband
and I were in the same pension fund. He was very much senior to
me. So I am already disadvantaged in that the valuation of my
pension is on a female basis rather than a male basis. Secondly,
my husband's family live a great deal longer than my family do,
actuarially going back a long time, so he is likely to draw his
pension for a lot longer than I am. Thirdly, like a great many
husbands nowadays, particularly in the public sector, he has taken
early retirement. All through the divorce he said he was not going
to it, (it was very evident he would), and at the last moment
he did. Fortunately for me I did not lose out on that particular
aspect, but because of that particular pension's provisions he
had a very much enhanced pension of six and two-thirds years'
enhancement. I would have lost out on all of that because it would
not have been part of the cash equivalent transfer value, so it
would have hit me very hard indeed. As it is I am already hit,
but it could have been even worse than it was. I hope that is
an example which helps you. A great many of the population are
employed within the Civil Service and local authorities. Also,
there are people who are in similar schemes where you get the
same sort of provision.
513. Just to take this further, at the moment
for cash equivalent transfer values assessment, medical evidence
is taken into account, is it not?
(Mrs Sinfield) In my particular case it was not.
514. So a case like the wife with MS may
not be picked up?
(Mrs Sinfield) Only if it is pushed for. That comes back
to another point we were making which is about training. This
is because the one problem we have found in Fairshares is helping
women deal with their own solicitors because their own solicitors
lack the training in this particular field.
515. Is there not a danger that if we decrease
the discretionary element, that we increase the costs and expenses—increased
actuarial costs in particular—making that process of divorce
that much more expensive and reducing the size of the pot available?
(Mrs Sinfield) But all of this has an assumption that
women have not got the nous to make a risk assessment of whether
it is worthwhile incurring extra costs for the longer term benefits.
You talk about middle classes but it does not matter what class
you come from. Intelligence does not go by class. A lot of women
are out there who can work it out themselves. Is it worthwhile?
They will make a judgment.
516. May I press you bit further on the
discretionary element. Early retirement is a very good example
but what if you have a spouse who is likely to be made redundant,
then in a sense you have a loss. If you have a situation where
there is an element of discretion but it is not guaranteed that
the courts will take this into account you could get tremendous
inequality, and what may work in your favour like early retirement
may work against you in terms of redundancy. In a sense, you are
running the danger of multiplying the possibilities of creating
grief.[2]
(Mrs Sinfield) But again, you see, the courts look at
these things in the round, so you are not just talking about that
particular aspect. You are talking about all the other elements
of the case as well and the court, particularly under the new
provisions, will look at all the assets. We do appreciate that
pension sharing is just one of the tools that the courts will
look at.
517. May I slightly change the track and
again ask you to draw your experience from your membership, and
behaviour patterns. One of the things which worries us is the
temptation, which there may be for people over the age of 50,
to cash in their personal pensions to pay for school fees or whatever
prior to the divorce, and, therefore, it would not be available
for sharing.
(Mrs Quin) I have not come across a single case of that
at all.
(Mrs Sinfield) With all the problems that were highlighted
about pensions, where you had the pension mis-selling, I cannot
imagine that there would be a great many people in that position.
Again, we are talking about the middle classes. They are the minority
so I think the particular instance that you are citing is very,
very minor and should not colour all the other women around.
518. You mention pension selling. One of
the things which has worried us as well was that it would require
some fairly sophisticated financial advice for women to make the
right decision, given the previous potential pension scandals
under which they were being sold. Do you regard this as a danger
that insurance companies will simply see, in a quite predatory
way, women as another group who may potentially be sold products?
(Mrs Quin) There is a grave danger of that. What we would
really like to see is a specific product set up, which guarantees
that there is protection solely for divorcées: somewhere
to put the pension that you have gained as a result of matrimonial
proceedings, that has specific protection clauses which these
companies could not break.
(Mrs Sinfield) There are all sorts of provisions actually.
You could leave the money where it was in the fund. The TUC made
some very, very cogent points about transferring pension. That
is very important for women where there is just a pension. When
it comes to the insurance companies selling, they are only going
to sell if they think there is something in it, and in a lot of
cases there is not going to be a lot of money there; so I do not
honestly think the insurance company is seeing this as an enormous
market. I think it is going to be a very small market indeed and
they will go where the money is.
519. One final point. On divorce, in most
schemes the divorcing spouse is given the option to try to take
their pot of money out of a pension scheme and reinvest it, or
that it be deferred under the fund or whatever. The public sector
schemes, under the current legislation, do not give a divorcing
spouse that option. He or she has to remain in this scheme. Do
you have a view on this?
(Mrs Quin) I do not know about Mary but I do not have
a problem with that. We are back to mis-selling. Why go into a
personal scheme if you have your index-linked, guaranteed, rock
solid Civil Service scheme?
(Mrs Sinfield) The only point I would make about it is
that I can quite appreciate the Treasury not wanting to pay out
the money. They are very good at that. But I do not see that there
is anything to stop transfers between unfunded schemes or even
to local authority schemes or National Health schemes. It is all
the same pot and there will be administrative costs which, no
doubt, the Treasury will hold up its hands about, but they will
be minor. So I would like to see provision whereby it would be
possible to transfer between unfunded schemes at least.
Ms Stuart: Thank you
very much.
v 1 Note by Witness: We would like to clarify
that we believe that earmarking and sharing should be applicable
to the same pension. Back
2
Note by Witness: Redundancy packages often include enhancements
of added years which would cancel any loss. Back
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