APPENDIX 3
Memorandum submitted by the Association
of Pension Lawyers (PS 16)
EXECUTIVE SUMMARY
The attached document contains the comments
of the Association of Pension Lawyers on the Pension Sharing provisions
in the Welfare Reform and Pensions Bill. The APL's main points
are:
It is welcomed that pension sharing
will only apply to divorce proceedings brought after the Bill
comes into force.
We think there are occasions where
pension sharing and earmarking should be permitted in respect
of the same marriage and the same scheme.
It is vital that there are standardised
provisions for pension sharing orders and agreements. Such provisions
would also be useful in the case of earmarking.
Further consideration should be given
to the calculation of pension debits in respect of members of
final salary occupational pension schemes who are still in pensionable
employment when pension sharing is implemented.
Funded occupational pension schemes
will wish to use the external transfer route for providing pension
credits and the regulations should make this possible even where
the former spouse does not specify an alternative scheme or arrangement
to which the transfer can be made.
Stakeholder schemes would be suitable
as recipients of such transfers.
We welcome the consultation by the
DSS on pension sharing, including the chance to consider the draft
clauses before the Bill was published. We believe that the final
legislation will be better as a result.
More detailed comments are set out in the full
response below.
INTRODUCTION
These comments on the provisions of the Welfare
Reform and Pensions Bill concerning pension sharing on divorce
are made on behalf of the Association of Pension Lawyers (the
APL). The APL was set up in 1984. Its membership consists of 700
lawyers advising pension schemes, mostly in private practice with
firms of solicitors.
The APL is a non-political organisation. Our
aim is to give help and input where we can on the details of proposed
legislation, rather than to comment on the policy behind the legislation.
Having said that, we do welcome the introduction of pension sharing
on divorce, provided the details are right.
We will structure our response so as to follow
quite closely the structure of the Bill. We have focused mainly
on funded, tax-approved, final salary occupational pension schemes
but we do make comments on money purchase, unfunded and personal
pension schemes where appropriate.
2. THE LEGAL
FRAMEWORK
Clauses 15, 17, 18 and 20 and Schedules 2
and 3 (Section references in this section refer to the
text of the Matrimonial Causes Act 1973 as amended, as it appears
in Annex A to the Explanatory Notes on the Bill.)
2.1 Mixed splitting and ear-marking in relation
to the same marriage
Despite the Government response dated 12 January
1999 to the Social Security Committee (which indicated at paragraph
7 that the Government was consulting Pensions and Family Law Practitioners
on this issue) the Bill prevents such a mixture:
A pension sharing order under Section 24B may
not be made in relation to the rights of a person under a pension
arrangement if there is in force a requirement imposed by virtue
of sections 25B or 25C, which relate to benefits or future benefits
to which he is entitled under the pension arrangement (Section
24C(7)).
The question remains, why is such a mixture
not going to be allowed?
What precisely is the Government's policy intentiondoes
the prohibition on mixture stem from a desire to ensure that (subject
to the variation powers discussed below) the Court will so far
as is practical make Orders for pension shares on only one occasion
(see the new Section 24B(3))?
It is not wholly clear whether the aim of preventing
two orders is achievedsee Section 25B(7B) which only precludes
two orders in relation to "the same marriage" or where
there has already been pension sharing "between the partners
to the marriage". This does not leave the interpretation
of Section 24C(7) free from doubt.
The prohibition on mixture significantly ties
the hands of the Court on any variation application pursuant to
Section 31. Pursuant to Section 31(7G) and (7H), there is not
to be a mixture even on variation applications. We can therefore
see the scope for some tactical manoeuvring in divorce settlements.
Arguably, if there is any chance at all that
a wife will want a pension sharing order to be made on a variation
application, in which she applies for a capitalisation of her
maintenance payments, the wife should not ask for relief under
Section 25B and Section 25C of a pension ear-marking nature (as
that will therefore limit the scope of the wife in any future
capitalisation application).
Similarly, there is scope for a husband's solicitor
to manoeuvre for a pension ear-marking order to be made so as
to limit the "damage" in terms of pension sharing orders
in the future.
2.2 No retrospection
Although the Explanatory Notes say that the
Bill has been redrafted following the various submissions made
to the Government, to prevent any pension share arrangement being
made in relation to divorce or nullity proceedings which are brought
before the coming into effect of the Welfare Reform and Pensions
Act, that prohibition does not seem to be expressly written into
the Bill.
2.3 Timing for implementation
The terminology of the Bill presumes that the
pension share orders will only apply to arrangements made pursuant
to the new divorce regime, which will come into effect when the
Family Law Act 1996 is fully enforced.
Our understanding, from a recent meeting with
the Lord Chancellor's Department, is that the new divorce regime
will come into effect in the autumn of the year 2000. Is a common
implementation date now intended for both pieces of legislation?
2.4 Non-UK pensions
Reiterating the point made in the paper which
was submitted by APL to the DSS in August 1998,[38]
a property adjustment order made under the Matrimonial Causes
Act can relate to property overseas; it seems anomalous that a
pension share arrangement could not also apply to overseas pension
arrangements.
There are admittedly questions of whether a
pension share order of this kind would be enforceable in an overseas
jurisdiction. However the order could be enforceable personally
against the husband within the UK jurisdiction. Highly paid UK
executives quite often have offshore pension arrangements or periods
of service in overseas schemes. Exclusion of non-UK arrangements
from pension splitting may encourage use of such arrangements
as an evasion technique.
2.5 Pension Sharing arrangements
The Government has dealt with the lacuna which
we identified in our submission to the DSS of August 1998, by
now preventing there being a pension sharing arrangement when
there is already a pension sharing order in force in relation
to the specific pension arrangement.
On the face of it, there is a more liberal regime
under the Bill in relation to the obtaining of a pension sharing
agreement, as opposed to a pension sharing order. The new Section
24B provides that a pension sharing order will only be made at
the appropriate time, that the Court will so far as practicable
make on one occasion all such provision as can be made, and that
no pension sharing order may be made after a divorce order except
(inter alia) on an application made with the leave of the court.
It seems that a pension sharing agreement may
be made by the parties, without such restrictions, after the divorce
order; the only policing of the Court is hinted at in the explanatory
note to Clause 20(2)(b)-the Government intends to establish
that agreements must have been produced to the Court before being
passed to the pension arrangement concerned.
It is uncertain what the function of the Court
will be in the circumstances; will it be to approve the wording
of the agreement, and satisfy itself that the agreement is set
out in the correct format, or will the Court be expected to consider
critically whether a pension sharing agreement is appropriate
in all the circumstances?
A qualifying agreement is defined in Clause
20(2) and it can be seen that much is left to the drafting
of regulations by the Lord Chancellor. The explanatory note to
Clause 20(2)(a) indicates that it is intended that the
agreement in question has been reached "following mediation
or other form of negotiation involving a third party". Two
matters arise:
(1) The ability of a "mediator"
(a term which in itself will have to be defined in regulations
which have not yet been drafted) to understand pension sharing
arrangements; many family mediators have no legal training and
so the Government intention to allow a qualifying agreement to
be made with the help of a mediator is puzzling.
(2) The definition of "qualifying agreement"
seems to oblige parties who act for themselves in a divorce to
involve "a third party" in the negotiations if they
want to have a pension sharing agreement.
Presumably the Government's intention is to
ensure that parties are properly helped with pension sharing arrangements,
but there is nothing in the Explanatory Notes to suggest that
the helper should be someone with expertise in the pensions area.
3. PENSION DEBITSCLAUSES
21-24
3.1 Clause 21
In sub-section (1)(a) we suggest deletion of
the words "of the appropriate amount" because it introduces
unnecessary complexity, given that Clause 23 bases the
debit on the percentage where relevant, not the amount.
The reference to the appropriate amount is only needed in sub-section
(1)(b).
3.2 Cash equivalent
We note that the pension debit will be based
on the CETV. There will, however, need to be a different approach
where pension sharing applies to members with pensions already
in payment. Also, where a pension scheme secures its benefits
by means of earmarked annuities, the legislation will need to
compel the insurance company concerned to provide the pension
debit by means of a compulsory partial surrender of the annuity
policy.
3.3 Timing
Clause 23 should make it clear that the
reductions in benefits where there is a pension debit will take
effect from the transfer day.
3.4 Active members of final salary schemes
We consider that further thought needs to be
given to the implications of Clause 23(2) in the case of
active members of final salary or other salary-related occupational
pension schemes. The intention is that the pension debit should
be part of the cash equivalent of the member's short service benefit
but that this should be provided by a reduction in the member's
long service benefit. This approach creates no difficulties where
the member does not draw his or her benefit until normal pension
age or leaves service entitled to a deferred pension but there
are practical issues where the member dies in service or retires
with an immediate pension after attaining age 50 or due to ill-health.
In particular, benefits on death in service can be different for
those on the death of a member prospectively entitled to a deferred
pension and the benefits on, say, ill-health early retirement
need not be the same as those payable on retirement at normal
pension age. Equally, most schemes apply the statutory LPI revaluation
to deferred pensions during the period of deferment whereas the
member's long service benefit would be growing during the period
of his service after the transfer date in line with the growth
in his earnings. This question of different methods of increase
applying during pensionable employment and during deferment will
also have implications for Clause 24(3).
3.5 Stakeholder schemes
The Bill should be amended so as to make it
clear that a pension sharing order can be made against the member's
rights under a stakeholder scheme.
3.6 Minor points
In Clause 21(7), in the definition of
"relevant arrangement", we wonder whether "arrangement"
should be "pension arrangement".
4. PENSION CREDITSCLAUSES
24-32 AND SCHEDULE
5
4.1 Discharging liability for pension creditsthe
method
We welcome the approach that gives the scheme
or arrangement the choice between conferring rights under the
scheme (internal transfer) or external transfer. We also welcome
the flexibility over the benefits to be created, under the internal
transfer approach. We note that the value of the rights must be
equal to the amount of the credits. It is important for pension
schemes that this transaction is cost neutral for them.
The scheme's option
We note that the default route for funded occupational
pension schemes will be the external transfer and that regulations
will provide for the situation where the former spouse does not
provide details of an alternative scheme or arrangement to which
the external transfer can be made. These regulations should give
the transferring scheme the ability to buy benefits by external
transfer on a money purchase basis, to keep down the costs and
therefore enable smaller transfers to be made. A stakeholder scheme
would be a suitable vehicle for such transfers.
Internal transfer
We have some concern about the status of holders
of pension credit benefit. Where the arrangement is a trust, they
will be entitled to benefits under the trust and will therefore
be beneficiaries, for the purposes of the trustees owing duties
to them (e.g., contemplating them where discretionary benefits
are awarded, dealing with them even-handedly). This requires trustees
(and perhaps employers) to have regard to a category of people
not contemplated when the trust was established. This may have
implications in final salary schemes in relation to discretionary
benefits and distribution of any surplus.
It seems a scheme could set up pension credits
on any of the following bases or in any combination of these bases,
whichever basis the member's benefits were on:
a fixed rate of benefit
a money purchase benefit
added years, for a spouse who is
already a member of the scheme in his or her own right
a notional period of pensionable
servicewe are not clear how this would work in a salary-related
scheme but presumably the spouse would have to be credited with
a notional salary as well.
In the notional pensionable service case the
credit would have to include revaluation in deferment but there
is no requirement for LPI increases once the pension is in payment
(Schedule 9, paragraph 49). In the other cases the scheme
would have the ability to decide whether revaluation or pension
increases would apply. We expect most schemes would want to create
rights in the same pattern as deferred pensions, although they
would not necessarily be the same in all respects and it seems
likely that options available to deferred pensioners would only
be made available on a cost neutral basis. From the administration
point of view, it seems easier to create pensions carrying LPI
increases than not.
We therefore welcome the Government's intention
to use the power to make regulations under Clause 32 of
the Bill to allow schemes to apply LPI increases to the whole
of the pension credit benefit.
External transfer
We note that, under Clause 26, the implementation
period will not start to run until the scheme has received copies
of the pension sharing order and the divorce order. Clause
26(1)(b)(ii) refers to prescribed information relating to
the transferor and transferee. Presumably the information in relation
to the transferee will include information about the chosen receiving
arrangement for an external transfer.
Presumably the regulations will allow transfers
without consent along the lines of regulation 12 of the Preservation
Regulations, simply on the basis of an equivalence of value test.
If an actuarial certificate will be necessary, and the actuary
has to compare the relative positions on winding-up under the
transferring and receiving arrangements, transfers without consent
will be much more difficult.
We note that, if the transfer is from an approved
arrangement, the receiving arrangement has to be approved and
also satisfy prescribed requirements. It would be helpful if some
indication of these could be given. We also note the requirements
about receiving arrangements where contracted-out rights or safeguarded
rights are transferred. Presumably, for contracted-out rights,
the requirements will mirror the Contracting-out Transfer Regulations.
The regulations should make it clear that a
stakeholder scheme will be a suitable vehicle to receive external
transfers.
Unfunded schemes
Paragraph 3 of Schedule 5 does not appear
to give the employer (as opposed to the managers of the scheme)
any choice over how the pension credit is discharged. Since the
payment of an external transfer crystallises the employer's liability,
the employer should have some say concerning the method of discharge.
Death before implementation
We realise there is a problem if the former
spouse dies after the pension sharing order is made but before
it is implemented. The explanatory note to Clause 27(2)
says regulations will provide that the deceased former spouse
should be treated as if they had become a member of the member's
pension arrangement. In other words, internal membership will
be compulsory in the circumstances. We are concerned about this
because it requires schemes which would otherwise be able to choose
to insist on an external transfer only to design a benefit structure
for internal transfer. The explanatory note refers to a return
of fund if the pension credit was derived from a personal pension
scheme. Would an occupational pension scheme be allowed to design
an equally simple benefit in these circumstances, for example
a return of fund, paid on discretionary trusts? Another possibility
would be to treat the order or arrangement giving rise to the
pension credit as a nullity so that the member does not suffer
the pension debit. If the spouse is dead, it would seem better
that the money should be used for the member's pension rather
than going to relatives of the deceased spouse.
We would like to see the ability for the member's
arrangement to hold the pension credit in suspense as a lump sum
if for any reason the liability for the pension credit cannot
be discharged, for example because the former spouse has failed
to notify a receiving arrangement, or because no receiving arrangement
can be found which will accept the former spouse, which might
happen perhaps in a case of a very small pension credit, or possibly
on the grounds of the ill-health of the former spouse.
4.2 Discharging liability for pension creditstiming
and sanctions
OPRA has power to extend the timescales for
occupational schemes but it seems there is no such flexibility
for other types of pension arrangement. Similarly there are penalties
for occupational schemes failing to comply but not for other types
of pension arrangement.
The timescales need to fit with the timescales
for transfer payments, both for consistency and so that the member
cannot require a transfer payment during the implementation period
and thereby defeat the pension sharing order.
4.3 Contracting-out
We note that "safeguarded rights"
will be prescribed by regulations and welcome the Government's
intention that they should be based on post-1997 contracted-out
rights in the case of both salary-related and money purchase schemes.
We believe that contracted-out money purchase schemes and hybrid
contracted-out schemes (including COMBs) will wish to provide
safeguarded rights which are as similar as possible to post-1997
protected rights whilst those contracted-out salary-related schemes
which decide to provide pension credits by internal transfer will
wish to provide safeguarded rights which meet the requirements
of the reference scheme test as applied in that scheme.
One implication of using post-1997 contracted-out
rights as the basis for safeguarded rights is that schemes will
have to make provision for benefits for a widow or widower of
the former spouse where the former spouse remarries after the
divorce. This is a policy decision but we are not sure that it
is necessary. The alternative is that pension credits could be
on a single life basis without survivor's benefits.
The proposed section 68A of the Pension Schemes
Act 1993 introduced by Clause 28 envisages that a scheme
which wishes to provide safeguarded rights must indicate this
by a Rule amendment. It would be sensible if such an amendment
could be introduced by the trustees using the powers under section
68 of the Pensions Act 1995.
4.4 Preservation and transfer rights
Clause 29 introduces new ss.101A to 101Q
in the Pension Schemes Act 1993 ("PSA"). The following
are comments on the new sections.
101B "pension credit rights"contains
a reference to "future" benefits. It would be helpful
if terminology could be made consistent with terminology in the
PSA, which simply refers to "benefits".
"normal benefit age"this
definition refers to the earliest age at which a person is entitled
to receive "a pension" under the scheme by virtue of
pension credit benefit ("PCB"). The definition of normal
pension age in s.180 PSA refers to "benefits" and the
two definitions should be made consistent if they are intended
to work in the same way.
101D Subsection (2) mirrors the provisions
which apply to short service benefit, such as alternatives to
paying it at normal pension date, which emphasises that this is
intended to deal with a divorcing member who would otherwise have
short service benefit. A separate section is needed to deal with
splitting a pension which is in payment or where the member is
past normal pension date.
101E This is one example of where the use
of "member" may cause confusion in relation to PCB.
"Member" is used in pensions legislation as meaning
someone who is or has been in pensionable service under the scheme
in question. 101E provides that a discharge under s.19 PSA only
applies where the scheme has a liability to provide PCB for or
in respect of "a member" of the scheme. Regulation 3
SI 1991/167 provides that a member is a person who has been in
pensionable service under the scheme. Since references to a "member"
of a scheme can become confused when looking at the amendments
made to the PSA by Clause 29, it would be helpful if a
different term could be used for a PCB holder. Legislation could
then provide that such a person was to be treated as if
they were a member for prescribed purposes, which would give more
flexibility. The definition of deferred member under the Pensions
Act 1995 seems to be a catch-all for all other types of member,
in which case the amendments in paragraph 47 of Schedule 9
will not work. Also, where PCB is in payment and if it has transferred-in
the PCB holder may fall within the "pensioner" definition.
To take another example, s.111 of the PSA allows all members to
pay voluntary contributions. Is that provision meant to apply
to PCB holders?
101F Again, "member" is used, and
is intended to cover the person awarded PCB rights, but it would
be helpful if a definition of member could make this clear.
101H This reflects the provisions of s.93A
PSA which also deals only with final salary occupational pension
schemes. However, we assume that the requirements of money purchase
schemes and personal pension schemes to provide statements of
cash equivalents on request will be extended to cover PCB.
101I We note that a further Guidance Note
from the Faculty and Institute of Actuaries will be required,
as well as the regulations contemplated.
101J Here, as well as elsewhere in the Bill,
penalties are to be imposed by OPRA. Both occupational (both final
salary and money purchase) and personal pension schemes are required
to comply with the provisions of the Bill. OPRA will deal with
occupational pension schemeshow are personal pension schemes
to be dealt with?
Similarly, this section allows occupational
pension schemes to apply to OPRA to extend the period within which
it must comply with the notice to transfer. There is no equivalent
for the personal pension providers.
101K There are no mirror provisions to s.100(3)
PSA, which allows a person to make a further request for a transfer
if the original one is withdrawn. We assume that it is intended
to allow this within the confines of not allowing too frequent
transfer requests.
101L We note the intention to lay regulations
similar to 8 and 9 of SI 1996/1847. These require discretionary
benefits (particularly pension increases) to be taken into account
in the calculation of cash equivalents unless the trustees direct
the cash equivalent shall not take account of the discretionary
benefits. When these regulations are laid, they should make it
clear that even if the discretionary benefits are included for
calculations of "ordinary " cash equivalents, it is
a separate issue whether they should be included for the calculations
of cash equivalents of PCB. This is a separate category of member
under the scheme, and trustees/employers may not wish to benefit
PCB holders with discretionary increases at all, but if an established
custom does arise, they may not feel it is justified to capitalise
those discretionary benefits for those who take external transfers,
even if they do for other members. Requiring them to do so may
result in PCB holders being excluded from discretionary benefits.
101N It might be helpful to have a provision
preventing a divorcing member transferring his/her benefit wholly
to the spouse where there is a potential claim by the employer
against the member under s.91 PA 1995.
101P Subsection (4). An unfunded top up scheme
may insure death benefits. It would be helpful to make it clear
that death benefits are excluded for the purpose of considering
"liabilities" for this purpose.
5. MECHANICSCLAUSES
33 AND 36-8
5.1 Clause 33
We welcome the redrafting of this Clause and
the flexibility to be introduced under it.
In (6)(b), the third word from the end should be
"or" not "of".
5.2 Clause 38
We note the new definition of "trustees
or managers" which takes account of the comment in our paper
to the DSS.
6. SCOTLANDCLAUSES
16 AND 74(2)-(4)
6..1 Earmarking
As earmarking is to continue alongside pension
sharing, it should be made more effective in Scotland by being
extended to pension rights as well as lump sum rights. There are
some circumstances where it could be useful to have the option
of earmarking even though pension sharing is available. Pensions
in payment and purchased annuities are obvious examples of this.
Many couples enter into a Minute of Agreement
at the time they separate because they do not in fact have grounds
to commence divorce proceedings immediately. It presents a practical
resolution to the division of matrimonial assets to enable the
parties to get on with their lives independently of one another
prior to any divorce being finalised. In those circumstances there
is generally an understanding or actual agreement that divorce
will proceed after a two year period of separation with the other
party providing the necessary consent. That may not always be
the case though, and many couples simply wait until the five year
period has passed. There will often be cases therefore where implementation
of an agreement on pension sharing is delayed for some considerable
time. It is not particularly desirable, nor does it follow the
principle of a clean break. It also creates potential for problems:
what if in the intervening period one spouse dies? A Minute of
Agreement will deal with discharging inheritance rights but it
cannot at present interfere with payments from a pension fund
on death.
If the intention of the spouses had been to
share the pension, but no divorce was available prior to the death
of one, then that intention cannot be satisfied. A payment might
be made by way of widow's benefit but that would be unlikely to
be of the same value as an agreed sharing provision. It is hoped
that regulations under Clause 23(3) will be wide enough
to cover that but it would be better in the principal legislation.
As proposed, only an agreed pension sharing
in a Minute of Agreement will be effective. Whilst it is possible
to conclude a Court Action on that basis, it would normally be
done by way of a Joint Minute which would inevitably result in
the pension sharing order being pronounced in due course. There
requires to be some evidence of the end of the marriage and that
simply entering into a Minute of Agreement will not of itself
be enough. It is however rare for parties to reconcile after an
elaborate scheme of division has been negotiated. Most instruct
the preparation of a Minute of Agreement with a view to divorce
when appropriate grounds exist. Might it not be better therefore
to consider that intimation of the registered copy of the Agreement
was sufficient, so long as it contains suitable provision for
divorce after two years or five? Even in the event of a spouse
dying in the interim period, the pension sharing could then be
given effect.
6.2 Legal Aid recovery
It is hoped that where a provision for a pension
sharing order is made that will not fall within the scheme recovery
of the Scottish Legal Aid Board even where the value of the order
is in excess of £2,500. At present, if a party craves the
specific property or payment order through the Court and benefits
in the manner craved, the Scottish Legal Aid Board has a clawback
for costs against the property or capital sum payment over and
above the initial £2,500 recovered. Where the order relates
to a transfer of property e.g. the matrimonial home, the Board
simply obtains a security over the property so that on its eventual
sale funds are recovered. With a capital sum payment, it is an
immediate recovery. We do not think it appropriate that such recovery
provisions should apply to pension sharing orders.
7. CONSEQUENTIAL
AMENDMENTS TO
PENSIONS LEGISLATIONSCHEDULE
9
The following comments relate to paragraphs
of Schedule 9:-
30. The amendments which apply revaluation
of deferred pensions where the PCB involves the ex-spouse being
credited with notional pensionable service will only work if there
is a further amendment adapting the references to termination
of pensionable service so that they will apply in the case of
an ex-spouse.
35. We welcome this amendment preventing
a member who has both rights under a scheme as an employee or
ex-employee and pension credit rights from exercising his right
to a cash equivalent in respect of the employment rights without
exercising his right to transfer his pension credit rights.
37A Section 111 of the PSA should be amended
to make it clear that a PCB-only member cannot pay AVCs.
48. We find it hard to envisage circumstances
in which trustees would decide that a scheme should be closed
to new active members but open to new PCB members. If they do,
it seems they will be able to insist on external transfereven
if the scheme is unfunded? The relationship with Clause 27(2)
(death before implementation) and paragraph 8 of Schedule 5
(reduced pension credit) needs to be considered here.
52. Section 68(2) of the PA 1995 should cover
pension debits as well.
55 et seq These seem to be substantive
changes which are not directly relevant to pension sharing. Under
section 91 at the moment the lien attaching to a member's benefit
can attach to the contingent spouse's pension. It seems that under
the proposed amendments to section 91 this may no longer be the
case, the argument being that a spouse "has a right to a
future pension under a scheme", whereas under section 91
at the moment the "accrued rights" are of the member
not of the spouse.
56(2) We are puzzled by the distinction being
drawn between "entitlement to a pension" and "right
to a future pension". From the legal point of view an active
or deferred member has as good an entitlement as a pensioner.
Perhaps the legislation should define what is meant by entitlementthis
might help in interpreting s.67 PA 1995 as well.
59. It is noted that the effect of this amendment
is that any reference to a "member" in the Pensions
Act 1995 will include a PCB member, unless the particular section
excludes such a member. We have already commented on the dangers
of automatically including them wherever members are mentioned,
especially if they are included in one Act but not in another.
If they are to be included as "members" they should
be expressly excluded from the definition of "deferred pensioners".
8. GOVERNMENT'S
RESPONSE TO
SELECT COMMITTEE
REPORT
In most areas, we welcome the Government's response
to the Select Committee report. Our further comments on the response
are:
8.1 Retrospection
We agree that pension sharing should only be
available to those who begin proceedings after the legislation
has been brought into force. However, as mentioned earlier, we
are not sure that the draft legislation fully achieves this objective.
8.2 Earmarking
We mentioned earlier that we do think there
are cases where earmarking and pension sharing might be permitted
in respect of the same marriage and the same scheme. We also suggest
that the Scottish courts should have power to make earmarking
orders affecting pension benefits.
8.3 Indexation
We welcome the Government's intention to give
occupational schemes the discretion to impose a single indexation
requirement on the whole of the pension credit.
8.4 Cash equivalent
We agree with the Government that pension debits
should always be based on the CETV although this concept will
need to be extended where the member does not have a right to
a CETV e.g., where the member is already in receipt of pension.
8.5 Implementation of the legislation
We agree that an implementation date of April
2000 is ambitious. Also, pension sharing cannot be implemented
until the relevant provisions of the Family Law Act 1996 have
been brought into force and family law practitioners may welcome
the chance to get to grips with the application of this legislation
before they have to cope with pension sharing.
8.6 Standardised forms
We consider it absolutely vital that there are
agreed precedents for pension sharing orders and for provisions
relating to pension sharing in agreements between the parties
under the Family Law Act 1996 and the corresponding legislation
in Scotland and Northern Ireland. Increasingly, financial provision
on divorce is being settled between the parties and the role of
the Court will normally be validating the agreement which the
parties have reached. Many of the problems which pension schemes
are facing concerning earmarking are caused by the fact that family
law practitioners do not have access to a system of precedents
for earmarking provisions which they can include when drawing
up consent orders. Therefore, if there was an agreed set of precedents
for pension sharing provisions, the training of lawyers which
the Select Committee recommends would be by reference to the agreed
precedents. It is not too late to have agreed precedents for earmarking,
in which case the training could cover both types of provision.
8 March 1999
38 HC 869 Appendix 5 pp. 147-161. Back
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