Pensions Bill

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Clause 83

Mr. O'Brien: I beg to move amendment No. 164, in clause 83, page 39, line 28, after first ‘order’, insert ‘or provision’.
The Chairman: With this it will be convenient to discuss the following amendments:
Government amendments Nos. 165 to 181
Government new clause 2—Projections of numbers of those on means-tested benefits.
Mr. O'Brien: The amendments extend the provisions of the Bill relating to pension compensation-sharing on divorce, or dissolution of a civil partnership for couples in Scotland, and I hope that hon. Members will support them.
Mr. Waterson: Again, I wish to make a short point. Will the Minister confirm that the current rules about pension-sharing apply in absolutely the same way in Scotland as they do here? Looking at some of the words that we do not tend to use in English law, I wonder whether they have a wider range of powers and whether he can give the Committee any idea of what those might be; “declarator of nullity” sounds quite dramatic, but he may have some other information on that. Most importantly, I wonder whether the 1999 legislation applies in exactly the same way in Scotland, or whether there is some strange variant of it that we need to know about.
Danny Alexander: The first thing that I want to say, as a Member representing a Scottish constituency, is that it is good that the Government have decided to extend this benefit to cases applying in Scotland, of which there are a substantial number under the PPF and the FAS. It is perhaps a little much to expect the Minister to be a Scots lawyer as well as an English one. I am certainly neither. However, I have had no representations from legal authorities or others in Scotland wishing to object to this. Given that Scots law differs, quite markedly in some respects, to the law in England, it seems to be a sensible way to extend the provisions in a way that is broadly similar. From my reading, the effect is broadly the same as that of the legislation proposed for England and Wales. I hope that is of some help to the Minister in responding to the hon. Gentleman’s questions.
11 am
Mr. O'Brien: It is, indeed, of enormous help.
As far as I am aware, the provisions will have broadly the same effect, although divorce law is devolved in certain respects in Scotland and therefore there are some differences. Qualifying agreements are used in Scotland, but not in England and Wales. At present, couples in Scotland can make a qualifying agreement to set out how a pension is to be shared. We seek to extend that to pension compensation sharing. Qualifying agreements differ from court orders in that they are not orders of the court. However, they still activate pension sharing. The mechanism for the implementation of a qualifying agreement is to effect pension sharing, as set out in section 28 of the Welfare Reform and Pensions Act 1999. Once the agreement has been made in the prescribed form in Scotland, it has the same effect with regard to pension sharing as a court order. That seems to be the main difference.
Mr. Waterson: I am grateful to the Minister for advising the Committee that that is not regarded as a court order because it is not an order made by the court. Even in Scots law, that must be a fairly simple concept to grapple with. I would like to be sure about this. Do the qualifying agreements have all the status and enforceability of court orders? This issue that will clearly keep me awake at night.
Mr. O'Brien rose—
Danny Alexander: Without wishing to steal the Minister’s thunder, it is certainly the case that a registered minute of agreement, which is what this describes, is not a court order. However, if it is breached, it can be enforced through the courts and variations can be agreed between parties using the court system and so on. The way in which it is enforced is broadly similar.
Mr. O'Brien: Mrs. Anderson, you will be relived to know that the hon. Member for Inverness, Nairn, Badenoch and Strathspey is entirely right.
Amendment agreed to.
Amendments made: No. 165, in clause 83, page 39, line 28, at end insert
‘, or provision contained in a qualifying agreement,’.
No. 166, in clause 83, page 39, line 30, after ‘order’ insert ‘or provision’.
No. 167, in clause 83, page 39, line 31, after ‘order’ insert ‘or provision’.
No. 168, in clause 83, page 39, line 33, at end insert ‘or provision’.—[Mr. Mike O'Brien.]
Clause 83, as amended, ordered to stand part of the Bill.

Clause 84

Activation of pension compensation sharing
Amendment made: No. 169, in clause 84, page 40, line 10, at end add—
‘(f) a pension compensation sharing order under section 8 of the Family Law (Scotland) Act 1985 (c. 37) (orders for financial provision);
(g) any provision corresponding to provision which may be made by such an order, and which—
(i) is contained in a qualifying agreement between the parties to a marriage or the partners in a civil partnership,
(ii) is in such form as the Secretary of State may prescribe by regulations, and
(iii) takes effect on the grant, in relation to the marriage, of decree of divorce or a declarator or nullity or (as the case may be) on the grant, in relation to the civil partnership, of decree of dissolution or of declarator of nullity,
except where the provision relates to the same rights to PPF compensation as are the subject of an order made under section 12B(2) of the Family Law (Scotland) Act 1985 (c. 37) (order for payment of capital sum: pension compensation).
(2) For the purposes of this Chapter, a qualifying agreement is an agreement which—
(a) has been entered into in such circumstances as the Secretary of State may prescribe by regulations, and
(b) is registered in the Books of Council and Session.’.—[Mr. Mike O'Brien.]
Clause 84, as amended, ordered to stand part of the Bill.

Clause 85

Creation of pension compensation debits and credits
Amendment made: No. 170, in clause 85, page 40, line 18, after ‘order’ insert ‘or provision’.—[Mr. Mike O'Brien.]
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Waterson: I have some queries, but I am sure that now the Minister is back on his home territory of English law he will have no difficulty in answering them. These issues are mainly to do with the business of the cash equivalent. Perhaps I can deal with clauses 85 and 86 rather than raising points regarding clause 86 specifically.
According to clause 86, regulations are yet again to be made for the calculation and verification by the board of the cash equivalent. May I ask the Minister, perhaps with growing plaintiveness, whether there is the slightest prospect of these draft regulations, or any draft regulations, being available to the Committee as we plough through our proceedings? For example, it is pretty well nigh impossible to make any judgment about how clause 85 is going to work without seeing the draft regulations. This might be a useful opportunity for the Minister to give us a reality check on where we are with all the other draft regulations under this Bill.
May I also ask a specific question about subsection (5)? It talks about “the valuation day” being such day within the implementation period as the board may specify. Again, it would be interesting to get some concept of how such a valuation day is going to be established, and what criteria the board would use in making such a determination. Obviously, if there is a big variation in the valuation day, it could make a significant difference to the amount of compensation payable under these provisions. In my habitual spirit of constructive debate, may I ask the Minister to help me on any of those issues?
Mr. O'Brien: I am afraid that the particular regulations to which the hon. Gentleman refers are not likely to be available during the passage of the Bill, so we will have to deal with them in due course. More generally, we are seeking to bring forward regulations as soon as possible, but we do not expect regulations on many of these issues to be available during the course of the Bill. Regulations on Bills are normally drafted after the Bill has completed its progress. On particular occasions, we are able to provide drafts of regulations, but with this Bill, which is enormously complex, we believe that it is right that when regulations are brought forward, they should be available for the normal period of consultation with various stakeholder groups. That is not likely to be the case between now and June, when I hope that the Bill will complete its progress through the two Houses.
On the other issue that the hon. Gentleman raised, the valuation day is going to be set by the board. The clause provides for the rights to be valued on the valuation day, and that is just the day that the board of the PPF uses to determine the value of the rights. The board will have to take a view, and the way in which it does so will have to be set out in regulations, as will what that valuation day will be. He is quite right that that could be quite an important event for individuals, because if the valuation day is either side of a particular date, it could affect the amount of money that people are entitled to receive. However, the best way of dealing with that is by setting it out in regulations, rather than trying to deal with it in detail. The aim of the legislation is to set out parameters, and more detailed guidance will be available in regulations.
What we are doing through these clauses, in essence, is to set out a framework. This is divorce law, and divorce law is inherently there to resolve conflict. There is thus likely to be quite a lot of contesting of the detail of what that law says, so it is important that the detail is there. That means that we are setting out the skeleton framework here in legislation. In due course, we will fill that in with both regulations and guidance so that we get the level of detail required to deal with divorce conflicts. I am afraid that that will take more time.
I am sorry that I cannot give the hon. Gentleman more detail about the valuation day, but I have set out the way in which we propose to deal with it. He is right to say that it is important, but the definition of the valuation day provides scope for the board of the PPF to choose the day when the valuation will be made, provided that it falls within the implementation period. That flexibility broadly follows existing provisions on the calculation of cash equivalent values for early leavers and pension sharing.
I accept that that is a less than fulsome description of the measure, but I cannot say much more about it. A fixed valuation day might make it unnecessarily complex for the rights to be valued, for example, which is why we think that it is better—as with pension sharing—that whoever is carrying out the sharing exercise uses a convenient date during the period set out in legislation.
Question put and agreed to.
Clause 85, as amended, ordered to stand part of the Bill.
Clause 86 ordered to stand part of the Bill.

Clause 87

Reduction of compensation
Amendment made: No. 171, in clause 87, page 41, line 6, after ‘order’ insert ‘or provision’.—[Mr. Mike O'Brien.]
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Waterson: I am again on a search for knowledge. A lot of issues will be raised with the PPF and a lot of calculations will have to be made, some of them in respect of relatively small claims. After analysing some of the figures, it is clear that, for both the PPF and the FAS, the size of payments will range dramatically, from relatively small to relatively large. Has any work been done on the extra administrative cost to the PPF of the provisions? There will clearly be a significant administrative cost. One could establish a likely cost based on the number of divorces a year, which is sadly increasing all the time, the claims on the PPF and the number of sharing orders a year. How might that impact on the administrative levy that pays for the PPF? The Minister might not have such facts at his fingertips, so I am happy for him to write to me about them. It strikes me that there may be a not insignificant extra cost on the PPF.
Mr. O'Brien: Usually, the administrative costs to carry out such an exercise would be levied on the couple in a divorce settlement. The cost of the exercise would be something for them to identify. The PPF will need to work out the cost to it of the exercise and then charge for it. The hon. Gentleman referred rightly to the relatively high level of divorce in this country, but in most cases—not all, because some will be pre-retirement matters—we will be dealing with pensioners, and the divorce rate among pensioners is not as high as it is otherwise.
Not a very large number of people will be affected, so it is unlikely that the administrative costs to the PPF will be substantial and, thus, the cost to individuals who request an administrative processing of their claim is not likely to be great. The cost of having a pension share carried out by the PPF will depend on exactly what activities the board will have to undertake, but it is expected to be in the region of up to £3,000, which means that a couple undergoing a divorce or dissolution of a civil partnership will pay similar costs whether they are sharing a pension or PPF compensation.
The board of the PPF intends to charge divorcing couples similar rates as recommended by the National Association of Pension Funds, which obviously has to carry out similar exercises for divorces. I hope that I have dealt with the hon. Gentleman’s question.
Question put and agreed to.
Clause 87, as amended, ordered to stand part of the Bill.
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