Select Committee on Social Security Fifth Report


ANNEX 1

Memorandum submitted by the Institute of Legal Executives (PS 10A)

INTRODUCTION

  1. The Institute responded to the consultation paper issued by the Department of Social Security in June 1998, and a copy of that response is annexed to these papers.[49] ILEX did not make specific observations on the draft legislation, but examined the principles and the factors which needed to be considered when putting these principles into practice. It has not been possible to produce a detailed comment on the draft legislation or the Select Committee's Fifth Report (HC869), but this response summarises the Institute's views on the principles which the legislation is designed to achieve.

SUMMARY OF VIEWS

  2. A summary of the Institute's views on the pensions sharing aspects of the Welfare Reform and Pensions Bill is as follows:

  3. The Institute agrees with the principle of pension sharing on divorce. The new arrangements will offer the opportunity for divorcing couples to make a clean financial break which is not possible under the current attachment arrangements. Divorcing couples should be given every opportunity to achieve financial independence, particularly where provision for children is involved.

  4. It is important that any arrangements on pension sharing are kept as simple and as administratively expedient as possible. A divorce is a difficult and stressful event, and often requires detailed technical work and extensive negotiation to reach agreement on divisions of property. If the legislation were too complex to put into practice, it would be rendered useless as it simply would not be used.

  5. Each case needs to be considered on an individual basis, and pension sharing should not be compulsory. It may not be appropriate in every case, and to make compulsory would undermine the government's aim of flexibility for divorcing couples in settling their financial affairs. It is right that the courts remain able to make separate financial provision to cover the value of a divorcing spouse's share of the pension in appropriate circumstances, without splitting the pension.

  6. Any arrangements made, whether by agreement or otherwise, should be as legally binding as if they were made by court order.

  7. Pension sharing arrangements should preserve the broad value of the pension rights, apart from reflecting the costs of the pension share (which is therefore borne by the divorcing couple not the taxpayer or other pension scheme members).

  8. The government should set a fixed ceiling on the charges which can be levied for valuations by the pension scheme provider, and couples need to be fully advised of the cost before they proceed with a pension valuation.

  9. When calculating the division of a pension on divorce, it must be recognised that the pension may have existed long before the marriage. The division should be based only on the premiums paid and benefits accrued on the pension during the time of the marriage. Those benefits accrued before marriage should not be included, but should remain the property of the divorcing party who has the pension. Where the other spouse has a pension of his/her own, that should be set off against the higher value scheme.

CONCLUSION

  10. The principle of pension sharing is a sound one, but must operate fairly to take into account for pensions splitting purposes only those benefits accrued during the term of the marriage, and the procedures for sharing pensions must be as simple as possible, legally binding but without the necessity of going to court.

March 1999


49   Not printed. See HC 869 p. li. Back


 
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