Select Committee on Social Security Fifth Report


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 intention—does 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 achieved—see 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 DEBITS—CLAUSES 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 CREDITS—CLAUSES 24-32 AND SCHEDULE 5

4.1 Discharging liability for pension credits—the 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 service—we 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 credits—timing 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 schemes—how 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. MECHANICS—CLAUSES 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. SCOTLAND—CLAUSES 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 LEGISLATION—SCHEDULE 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 transfer—even 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 entitlement—this 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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