Select Committee on Social Security Fifth Report


APPENDIX 16

Memorandum submitted by the Solicitors' Family Law Association (PS 14)

INTRODUCTION

  1.1 The Solicitors' Family Law Association was founded in 1982 and has a current membership of over 4,000. It is one of the largest groupings of solicitors outside the Law Society. It has a membership spread across England and Wales ranging from those in specialist or large commercial firms with private practices to High Street general practitioners dealing exclusively with legal aid work. The hallmark of the membership of the Association is that its members subscribe to a Code of Practice which embodies a conciliatory and constructive approach to family proceedings. In 1999, the Association is to launch a specialist Accreditation Scheme, which includes pensions as a specialist topic.

  1.2 The Association responded to the Consultation Paper: Reforming Pensions for a Fairer Future ("the earlier Response"). This response appears as Appendix 9 to the Fifth Report from the Social Security Committee of Session 1997/98 (HC869).

SUMMARY

  2.1 The Association warmly welcomes the proposed introduction of pension sharing. The Association is pleased that in the Welfare Reform and Pensions Bill the Government has addressed many of the issues identified by the Association in the earlier Response. The Government is to be congratulated on helpfully providing a draft of the amended Matrimonial Causes Act 1973 as Annex A to the Explanatory Notes to the Bill.

  2.2 The Association believes that it would be useful to identify those issues which remain of concern to the Association referring to the earlier Response as appropriate.

SEPARATION ORDERS

  3.1 The Association remains concerned that the Government has ignored its submission that pension sharing orders should be available on the making of a separation order as well as on the making of a divorce order. The Association's views are set out in paragraph 2 of the earlier Response, which drew attention to the fact that, where a separation order is made, the parties would not in the absence of pension sharing be able to benefit from a variation of settlement order in relation to a pension arrangement. Unless this issue is addressed, serious injustice will be caused to those spouses who cease to be entitled as of right to a widow's pension upon separation. Remedying this injustice is unlikely to affect adversely the party with pension rights or pension providers in that the scheme of the Bill is that only one pension sharing order may be made in relation to any one pension arrangement. A second pension sharing order in relation to a pension arrangement would not, therefore, be possible on divorce when such an order had been made at the time of the separation order in relation to the same pension arrangement. Curiously, there is nothing to prevent the parties agreeing on pension sharing at the time of a separation order by means of a qualifying agreement, although such provision will only take effect upon the making of a divorce order (Clause 20(1)(c)).

PENSION SHARING ORDERS AND EARMARKING ORDERS

  4.1 It is to be regretted that the Government has not yielded to the representations contained in paragraph 5 of the earlier Response that it should be possible to have an earmarking order in relation to death benefits under the Matrimonial Causes Act 1973, s 25C as well as a pension sharing order in respect of the same pension arrangement. The fundamental reason for this submission is that the cash equivalent transfer value does not include any valuation ascribed to the death in service lump sum benefit.

  4.2 The illogicality of this position is again borne out by the position with regard to qualifying agreements. The terms of the Matrimonial Causes Act 1973, s 24C(7) are such that it will still be possible to achieve pension sharing by means of a qualifying agreement where there is already an earmarking order in place.

  4.3 Further, the Explanatory Notes to Clause 19(2) (page 31) state that "We intend to use regulation-making power to exclude [from pension sharing] survivors' benefits payable to a member in his capacity as a survivor (such as, a widow's or a widower's pension payable in respect of a former marriage)," from pension rights which will be shareable. This again emphasises how unsatisfactory it is that a death in service lump sum benefit cannot be earmarked in respect of the same arrangement where there is a pension sharing order.

DIRECTION NOT TO COMMUTE

  5.1 It is submitted that the wording of the new Matrimonial Causes Act 1973, s 25B(7) is not sufficiently clear as to enable the court to make a direction not to commute. However, it is presumed that the new wording was intended to achieve this purpose.

EARMARKING FOR CHILDREN

  6.1 It is regretted that the Government has not taken up the submission contained in paragraph 6.4 of the earlier Response to which attention is again drawn.

FORMULATION OF EARMARKING ORDERS

  7.1 The new Matrimonial Causes Act 1973, s 25B(5) provides that any earmarking order must be expressed in percentage terms. This seems unduly restrictive. There is no reason, for example, why an earmarking order should not be for a fixed amount when it relates to a pension in payment.

CROSS-BORDER ENFORCEMENT

  8.1 It is noted that the issues addressed in paragraph 9 of the earlier Response do not appear to have been dealt with.

AGREEMENTS

  9.1 The Association remains concerned that the issue raised in paragraph 12 of the earlier Response has not been dealt with. This concern is heightened by the Explanatory Note on Clause 20(2)(b) (on page 32 of the Explanatory Notes) which again suggests that an agreement containing pension sharing will be subject to judicial scrutiny when other forms of agreement will not.

"REASONABLE" CHARGES

  10.1 It is still not clear who will assess the reasonableness of the charges to be made by pension providers. It is submitted that regulations should specify who will assess. Reference is drawn to paragraph 14 of the earlier Response.

REBUILDING AND TRACKING

  11.1 Reference is again drawn to paragraph 16 of the earlier Response.

FURBS AND UURBS

  12.1 The former are covered by Schedule 5, paragraph 1(1)(a); the latter are covered by Schedule 5, paragraph 3(1). However, Schedule 5, paragraph 3(2) refers to "trustees or managers" and not to the "employer" who is the person who has the liability to pay the pension benefits.

3 March 1999


 
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