Time for discharge of liability
Question proposed, That the clause stand part of the Bill.
Andrew Selous (South-West Bedfordshire) (Con): May I apologise to the Committee and to you, Mrs. Anderson, for not being here earlier? I was not here because Mr. Speaker granted me an Adjournment debate in Westminster Hall, which ended at only 11 oclock. I know that this side of the Committee was in the very capable and experienced hands of my hon. Friend the Member for Eastbourne.
I want to make a small point about clause 88, which will shadow some of the discussion that we will have about the amendment tabled to clause 89. I notice that there is provision in clause 88(3) for regulations to extend the implementation period, but not to open up the possibility of shortening it. I wonder whether the regulations could be worded to allow for the implementation period to be varied, rather than just extended. Will the Minister comment on that?
Mr. O'Brien: I will consider whether the regulations should be able to do that. I confess that I have not done so until now, but we are still looking at the drafting of the regulations. When we come to deal with them, I will consider whether it would be appropriate to do that.
Question put and agreed to.
Clause 88 ordered to stand part of the Bill.
Andrew Selous: I beg to move amendment No. 7, in clause 89, page 41, line 17, leave out 4 months and insert 2 months..
The Chairman: With this it will be convenient to discuss amendment No. 10, in clause 91, page 42, line 24, leave out paragraph (a).
Andrew Selous: On the same theme that I raised on clause 88, I am curious about where the figure of four months for the implementation period has come from, given that four months is quite a long time for someone on a low income to be without money that they should regard as rightfully theirs. This is a probing amendmentwe have not alighted on a specific period of two months. I will be grateful if the Minister will comment on whether that period of four months could be reduced.
Amendment No. 10 is another probing amendment to find out why the implementation period can be postponed in prescribed circumstances and why that is necessary. Again, we are looking at the matter from the point of view of people who are in straitened financial circumstances and hardship and do not have the share of a pension that is rightfully theirs.
Danny Alexander: I echo the hon. Gentlemans point and query why four months is deemed to be a reasonable time period in such cases. The Minister might have a good reason for alighting on the particular period of four months, but it seems appropriate that in such casesparticularly for those on low incomes who might need that money more
Mr. O'Brien: The four-month time limit in the Bill is the same as that for implementing a normal pension share, so the hon. Member for Inverness, Nairn, Badenoch and Strathspey is quite right that we have looked at arrangements that apply in other areas and taken that as the standard. That same time limit was arrived at following consultation involving the judiciary, family lawyers and trustees of pension funds. It is important that compensation sharing does not depart unnecessarily from established principles for pension sharing. Inappropriate changes would lead to additional complexity and create confusion and uncertainty, and having different time limits would seem to run counter to our aim. We take the view that this is what would normally be the case, and therefore we would apply those criteria.
Andrew Selous: I understand that we might need to have the period of four months. However, could it be possibleor would the Minister like it to be best practiceto try to make the implementation period shorter? I am wary of setting down four months in legislation so that the solicitors and the PPF think, We have four months, so we do not need to worry, or, We have three months, three weeks and three days, and that is our statutory duty, when if things could be done quicker, no hardship would have been caused. That would be a good thing to try and achieve.
Mr. O'Brien: Normally the process would be done more quickly. Four months is a maximum, and the aim would be to get things done within that time. However, to implement a compensation share, the PPF must calculate how the order will reduce the transferors compensation, and calculate the level of compensation due to the transferee. That will take time and must be done accurately. Once that is done, the PPF must ensure that correct arrangements are in place so that the two parties receive the correct payments and are informed of their new entitlements. They should also have the opportunity to respond to the figures that they have been given, and to raise any queries about the accuracy of those figures. In divorce cases, lawyers want to query just about everything, especially if there is a level of conflict.
Where the transferor is already receiving monthly payments when the order, or qualifying agreement in Scotland, is made, it would be necessary for the PPF to give the person notice of the date that their payments will be adjusted and, if appropriate, put in place immediate payments for the transferee. The PPF makes payments monthly, in advance, on the first of every month. Therefore it must have enough time to put those arrangements for payment in place.
In that sense, the period is a maximum. As part of best practice we would want the process to be done more quickly than the maximum time, and I understand that in most cases, for pension sharing, it is possible to do so. However, two months would clearly be too short a period if, for example, a calculation was made and the amount of that calculation and the way in which it was arrived at led to a dispute between lawyers. That dispute has to be resolved, and in the meantime there are lawyers who, with their usual speed, exchange letters and do the work when something arrives on their desk.
Such processes always take time, and it is unlikely that two months would be sufficient, although I accept that the amendment is probing. I wish that we could change the culture of lawyers, but that is, I think, a bit beyond our ken. We should stick with the current basis upon which changes are made. In answer to the hon. Gentleman, best practice would be a shorter period. This is the maximum, and we want to stick with the rules as they more generally apply to pension sharing.
Andrew Selous: I am reassured by what the Minister has said about best practice, and that he has noted the importance of trying to get things done right and as quickly as possible. He said that four months is a maximum, not a target to be aimed for. Having heard that reassurance, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment made: No. 172, in clause 89, page 41, line 24, after order insert or provision.[Mr. Mike O'Brien.]
Clause 89, as amended, ordered to stand part of the Bill.
Discharge of liability
Andrew Selous: I beg to move amendment No. 8, in clause 90, page 41, line 39, at end insert and transferor..
The Chairman: With this it will be convenient to discuss amendment No. 9, in clause 90, page 42, line 12, leave out subsection (8).
Andrew Selous: This is a small point relating to clause 90(2), which says that a notice must be sent to the transferee. There is nothing wrong with that and we certainly expect that to happen. However, that is also a significant event for the transferor, and it seems entirely reasonable that the person who is having their pension reduced and the person to whom a pension is rightly being paid should be informed in writing about what is happening. The Minister might agree, but we shall see.
I apologise for there not being an explanatory note to amendment No. 9, but we tabled it before the explanatory note system was in place. My concern about subsection (8) is that, albeit in a few circumstances because of biology, as it were, dependent children could lose out on what would have come to them as a result of the death of one of their parents.
Mr. O'Brien: The clause sets out how the board of the PPF discharges its liability under a compensation-sharing order following a divorce, annulment, dissolution of a civil partnership or a nullity. It is important that the board can be certain that it has discharged its liabilities and that the parties to the divorce or dissolution are properly notified about how that has been done.
The clause makes it clear that liability is discharged when the notification is sent to the transferee that the sharing order has been implemented and that they have compensation rights in the PPF. Clearly, that cannot happen if the transferee has died, for example. Instead, we need to look at the rights of others on the death of a person. When members die, the PPF pays compensation to surviving spouses, civil partners, unmarried partners and dependent children when the schemes rules make the appropriate provision. That is why we need to ensure that, when the transferee dies before the transfer is complete, the correct compensation rights are created for their surviving partner or children. That is no different from the way in which the PPF would pay survivors benefits following the death of members after the transfer was completed. However, because the implementation is not complete, that is potentially a complex and somewhat technical matter, which is why the necessary provisions will be set out in regulations. Amendment No. 9 would remove the power to make those regulations.
Amendment No. 8 would mean that the board would have discharged its liability only when it had notified both the transferor and the transferee of the new rights created for the transferee by the compensation share. Clearly, it is right that both parties receive appropriate notification of the outcome, but discharging liability is different from merely providing information. It is right that information should be given to both parties on the outcome of the compensation-sharing order.
Regulations made under clause 93, which covers the supply of information about compensation sharing, can specify the information that the board of the PPF will have to provide to the parties in consequence of the implementation of the sharing order. The regulations will make sure that both parties to the divorce or dissolution receive the appropriate information about how the sharing order has been implemented.
Amendment No. 8 is thus unnecessary and has the potential to create ambiguity. We need a clear determination of when the legal process for the PPF board is completed. The clause sets out that legal process. It does not mean that the other party will not be informed. We intend to ensure under regulations that the other party will be informed, but it will not be a necessary part of the legal process for the board to have ensured that both parties were informed. Someone might have gone abroad or be difficult to contact. I have known of divorce cases in which someone has left the country and does not want to be available.
Andrew Selous: I accept what the Minister is saying, but for the avoidance of doubtI accept that the discharge of liability is different from the passing on informationbut the transferor will receive a letter or something in writing saying what has happened. I would be grateful if the Minister confirmed that.
Mr. O'Brien: The straight answer is that that is our intention. There would be a requirement; not a legal requirement to complete the process, but that the PPF board should be in a position where it will inform both parties of the outcome of the process that they have undertaken. So information should be given to both parties, yes. However, there are circumstancesI am adding a slight caveat to itwhere it is not always possible to get in contact with somebody in a divorce because, basically, they have disappeared. There will not be a requirement that that must be done, but there will be an obligation on the board to seek to inform so that both parties are properly informed.
Andrew Selous: Again, I am reassured by what the Minister has said about the intention of amendment No. 8. I accept that it should not happen by way of my amendment and the arguments that he has given. However, I am reassured because the purpose of the amendment is going to be achieved in terms of what the Minister has said. I am also reassured in terms of what he said about amendment No. 9, because he has reassured me that the regulations in subsection (8)(b) will deal with the issue that I was seeking to address. In that case, I beg to ask leave to withdraw the amendment.
Amendment , by leave, withdrawn.
Clause 90 ordered to stand part of the Bill.
Schedule 4 agreed to.
Charges in respect of pension compensation sharing costs
Amendments made: No. 173, in clause 91, page 42, line 32, after order insert or provision.
No. 174, in clause 91, page 42, line 32, after provision insert (provision for apportionment).
No. 175, in clause 91, page 42, line 34, at end insert for apportionment.
No. 176, in clause 91, page 42, line 35, after order insert or provision.
No. 177, in clause 91, page 42, line 35, leave out such provision and insert provision for apportionment.
No. 178, in clause 91, page 42, line 39, at end insert or provision.[Mr. Mike O'Brien.]
Question proposed, That the clause, as amended, stand part of the Bill.
Danny Alexander: I am sorry to slow progress for just a second, but I have a couple of questions relating to this clause, about child use and pension compensation-sharing costs. The clause gives, again, very broad powers for the Secretary of State to make regulations to allow the PPF to recover charges, and I guess that that is quite usual in the cases of pension compensation sharing on divorce. None the less, it would be useful if the Minister could give at least some reassurance that these charges will not be excessive, and that they will be in line with charges in normal such cases, so that anyone reading our proceedings can be clear that the intention of the clause is not in anyway to have punitive or excessive charges, and that whether he
Mr. O'Brien: The board of the PPF intends to charge costs based upon the National Association of Pension Funds recommended scale of charges. It is broadly accepted that that is best, so that is the basis upon which it will act. That means that divorcing couples will be charged roughly as the pensions share compensation as they would be charged to share aid pensions. The sharing order will normally apportion costs, but the clause provides for the payment by the transfer, or where that is not the case.
Andrew Selous: For clarification, is that in terms of an hourly rate, or is it a percentage of the funds?
Mr. O'Brien: I can give some information about the way in which these rates are charged. The PPF intends, as I say to follow the NAPF charging rates. I have here some quite detailed charging rates about pension-sharing costs for active and deferred members, which I can pass onto the hon. Gentleman. I am looking at a table, which talks about cash equivalent transfer values. Where the cash equivalent cash transfer value is between £150 and £200[ Interruption. ] It would probably be easiest if I passed the document around the Room. The figures are somewhat complex but, essentially, not unreasonable. As I have already indicated, the maximum is £3,000, but the figures charged depend on the cash equivalent transfer values at various different stages.
Mr. Greenway: I sympathise with the Ministers difficulty in understanding those figures. In my experience, the biggest problem is not the fees, which seem to be wholly reasonable, but the calculation of the cash equivalent transfer value. That is not mentioned in the clause and is an entirely separate matter.
Mr. O'Brien: The hon. Gentleman is quite right. The cash equivalent transfer value might well be an issue, and we must ensure that we have sufficient time to consider that. We have already discussed that matter. However, the fees set down on the right hand side of the document that I am handing round the Committee range from £150 up to £2,550 through a range of different figures. Those are the figures that run down the right hand side of the column. I thank the hon. Gentleman for the question, and I hope that with that reassurance we can move on.
Question put and agreed to.
Clause 91, as amended, ordered to stand part of the Bill.
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