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Lord Stoddart of Swindon: My Lords, why is it that this House and another place continually have to deal with such absurdities? Is it not intolerable that an organisation should be trying to impose ridiculous restrictions on substances that we have used over hundreds—indeed, thousands—of years? When was a fire or explosion last caused by Scotch whisky? When was anybody killed because it is a corrosive substance? I understood that it was good for us. The Scots are always telling us that their whisky is good for us. Can the Minister justify the fact that the Scotch whisky industry has to pay at least £2 million for relabelling barrels so that they can be transported from place to place?

Earl Howe: My Lords, the noble Lord raises a number of points. I should like to address his last point, particularly as that is a substantive one. The fact is that whisky is a flammable liquid. It is transported in

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unmarked vehicles which display, I am told, only an orange placard to indicate that they carry dangerous goods. The Customs lock cannot readily be seen in an emergency. Hazard warning labels can therefore play an important part in identifying the nature of the hazard. There have been some unfortunate incidents and both the health and safety inspectorate and the Scottish fire services inspectorate support the need for labelling.

Lord Carter: My Lords, have the Government made any attempt to calculate the effect on jobs in the whisky industry if all five of the directives were accepted? Would the effect on jobs be greater or less than the loss of jobs resulting from the Government's increase in the duty on whisky which they had to apply because they lost the argument on VAT on fuel?

Earl Howe: My Lords, approximately 15,000 people are employed in the Scotch whisky industry. The Government have made no specific calculation with regard to the directives because we hope that at least two of them will not apply to the Scotch whisky industry. The excise duty rates are a matter for my right honourable friend the Chancellor of the Exchequer. The Government have listened carefully to what has been said by those in the industry and we will not seek measures which cause a switch away from spirits or an overall fall in consumption.

Baroness Strange: My Lords, is my noble friend aware that whisky is the water of life to us Scots and that we do not take kindly to silly Sassenach stipulations from over the water?

Earl Howe: My Lords, I should be more than happy to discuss this matter later with my noble friend, preferably over some liquid refreshment emanating from north of the Border.

Lord Cledwyn of Penrhos: My Lords, is the Minister aware that Welsh whisky is inflammable but safe? Will he give an assurance that no one will interfere with it?

Earl Howe: My Lords, I should also be delighted to discuss this at a suitable moment after these proceedings.

Lord Monson: My Lords, following the Minister's reply to the noble Lord, Lord Stoddart, does he agree that the transportation of whisky within the United Kingdom cannot possibly affect the people of Portugal, Greece, Belgium or France in any way? Therefore, is it not unmistakably a matter where the principle of subsidiarity should apply?

Earl Howe: My Lords, this is an issue which our own health and safety inspectorate supports, together with the Scottish fire services inspectorate. In that sense, it is a matter for us to resolve and we believe that it is an important measure.

Lord Stallard: My Lords, the Minister said that the regulation applies to Scotch whisky because it is inflammable. Does it also apply to brandy?

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Earl Howe: My Lords, I have no doubt that it applies to brandy. I am advised that Scotch whisky has a similar flashpoint to various petroleum and ethanol products.

Lord Pearson of Rannoch: My Lords, will my noble friend go further than the answer he gave to my noble friend Lady Carnegy? She referred to what is normally known as the Seveso II directive. Will my noble friend prevail upon our partners in Europe not to go further with the Seveso II directive until the Greeks have done something to carry out Seveso I?

Earl Howe: My Lords, my noble friend makes an important point. The Commission is aware that several member states have not implemented the first directive and it has indicated that it is anxious to remedy that situation.

Lord Peston: My Lords, am I correct in saying that alcoholic beverages of this kind are now included because the flashpoint criteria have been raised? Is not the number now so high that it is extremely unlikely that an explosion will involve whisky? I am a supporter of the Union but I am bound to say that the situation sounds crazy and bureaucratic because one starts with an article at one end of the scale connected with genuine dangerous chemicals and someone is sitting in his office thinking, "What can I add?", and one has ended up with whisky. The situation sounds weird. Will the Minister clarify it?

Earl Howe: My Lords, the Government and the Scotch whisky industry are in agreement that, with regard to the storage of whisky, there is a sound technical case for not including whisky in the proposed directive on hazards involving dangerous substances. On the other hand, with regard to the transport of whisky, it must be said that there have been some unfortunate incidents involving transporter lorries and so forth. That has led to the Health and Safety Executive coming down on the side of recommending hazard warnings.

Delegated Powers Scrutiny Committee

3.4 p.m.

The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper. In doing so, perhaps I may seek your Lordships' indulgence to say that we were most sorry to hear of the illness of the noble Lord, Lord Rippon of Hexham, and we look forward to news of his progress. I wish to take this opportunity of thanking him most warmly for his distinguished and pioneering chairmanship of the committee. In fact, he championed the cause of this development in our procedures, which has further enhanced the reputation of your Lordships' House, in particular in its scrutiny work.

I also wish to thank the acting chairman, the noble Lord, Lord Elton, for the most able way in which he has chaired the committee and for his willingness to do so. He has enabled the committee to continue its

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work uninterrupted. Finally, I thank the noble Lord, Lord Alexander of Weedon, for allowing his name to be put before your Lordships today.

Moved, on behalf of the Committee of Selection, That the Lord Alexander of Weedon be appointed chairman of the Select Committee in the place of the Lord Rippon of Hexham resigned.—(The Chairman of Committees.)

The Lord Privy Seal (Viscount Cranborne): My Lords, perhaps your Lordships will allow me to echo the remarks made by the noble Lord the Chairman of Committees. All of us were most distressed to hear of the illness that has afflicted my noble friend Lord Rippon of Hexham. I am sure that I take the House with me in saying that we wish him the speediest of recoveries not only because of the respect and affection with which he is regarded in this House but, as the noble Lord the Chairman of Committees said, because of the pioneering work which my noble friend undertook not only in the Delegated Powers Scrutiny Committee but in a number of tasks which the House asked him to undertake. He has acted in the highest traditions of elder statesman—and I use that phrase advisedly—in your Lordships' House. I suggest that all noble Lords owe my noble friend a great debt of gratitude.

Noble Lords: Hear, hear!

On Question, Motion agreed to.

Pensions Bill [H.L.]

3.6 p.m.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Mackay of Ardbrecknish.)

On Question, Motion agreed to.

Clause 79 [Schedules of payments to money purchase schemes]:

Lord Lucas moved Amendment No. 172:

Page 48, line 20, leave out (" 3") and insert ("(Prohibition orders)").

The noble Lord said: My Lords, I spoke to Amendments Nos. 172 and 173 with Amendment No. 3. I beg to move.

On Question, amendment agreed to.

Clause 80 [Schedules of payments to money purchase schemes: supplementary]:

Lord Lucas moved Amendment No. 173:

Page 48, line 35, leave out (" 3") and insert ("(Prohibition orders)").

On Question, amendment agreed to.

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Baroness Hollis of Heigham moved Amendment No. 174:

After Clause 82, insert the following new clause:

("Pensions adjustment order

.—(1) A matrimonial court may make a pensions adjustment order (referred to in this section as "an order") in the course of adjudicating upon or disposing of any matrimonial proceedings where to make such an order would in all the circumstances be reasonable.
(2) In deciding what is reasonable a matrimonial court shall have regard to any agreement reached between the parties but where no such agreement exists may make an order where it is requested by either party.
(3) An order may be made in such terms as the matrimonial court shall consider to be appropriate and in particular the matrimonial court may provide for:
(a) the off-setting of the value of the pension assets against any current assets which exist in the marriage; or
(b) the division of the pension assets between the parties so as to provide a separate pension asset for each party; or
(c) an income to be paid by the scheme to each party once the member reaches retirement age, the proportion to be determined by the matrimonial court at the time of the matrimonial proceedings.
(4) Where an order is made in the terms set out at (3) (c), the order shall also provide for arrangements to be made for the other party in the event of the member's death.
(5) The Secretary of State shall prescribe in regulations the method of valuation to be applied to pension assets by the matrimonial court to be used in determining what order to make.
(6) The matrimonial court may in making an order have regard to the position of the administrator and may take into account any administrative complexity in deciding whether such an order is appropriate in all the circumstances.
(7) The making of an order shall in no circumstances form the basis of any decision made by the Commissioners of the Inland Revenue to remove the exempt approved status or to alter the tax status of a scheme provided that the spouse or former spouse in whose favour an order has been made shall be treated for the purpose of the retention of benefits the same as the member.
(8) In this section—
"administrator" means the trustees of an occupational pension scheme or the administrators or managers of such a scheme in the absence of trustees or the administrators or managers of a personal pension plan;
"matrimonial court" means the Family Division of the High Court or a county court exercising jurisdiction in relation to matrimonial proceedings;
"member" means a member of an occupational pension scheme or a person having a personal pension plan or retirement benefit plan or other arrangement whereby benefits are to be provided to that person on retirement;
"scheme" means an occupational pension scheme or personal pension plan or retirement benefit plan or other arrangement whereby benefits are to be provided to a person on retirement.").

The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 175, 225, 226 and 247 which deal with the issue of pensions and divorce. In the light of the Committee debate, I am sure that all noble Lords wish us to address that issue. I pay tribute in particular to the noble Baroness, Lady Young, who has worked so hard—especially on the Minister. The fact that today we are discussing how and not whether we introduce the measure is, I am sure, due to the strength of opinion that your Lordships voiced in Committee. If now within the framework of the Bill we get it broadly right we shall together have done something truly worth while.

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We all agree that the pension asset belongs to the family and not just to the scheme member, who is usually the husband. The wife, whether by contributing her earnings to the joint income or by supporting her husband, bringing up the children and moving with him from job to job, has contributed to that pension. It belongs to them both. Yet legally it cannot be divided; legally it belongs only to him. Therefore, on divorce, if there are not enough offsetting assets, she will not receive her fair share of her joint matrimonial resources. She faces an old age of loneliness, poverty and increasing desperation.

I suspect that we have all received heart-wrenching letters. We have received letters from husbands who wish to assign part of their pension in order to keep some of their current assets and letters from wives who have lived their lives through, and for, their families and who find themselves abandoned in their late 50s.

I wish to quote briefly from two letters. The first is from Mrs. B. from Wiltshire, who says:

    "My own case is typical. I was left after 26 years of marriage looking after two daughters who both have incurable medical conditions. After eight house moves to further my husband's career, I am now left aged 50 still looking after my ill daughters with little or no prospect of finding employment, let alone making pension provision for my old age".

The second letter is from Mrs. C. of Birmingham, who says:

    "We had been married for 30 years with my part-time earnings going into a joint income from which my husband paid out as much as we could afford in AVCs to bolster his pension. I was not entitled to a pension but was told by my husband that I would not need one".

In other words, the wife's financing of the husband's AVCs would provide for both of them. In consequence, he built up a very considerable pension. She has now—I use her words—

    "been traded in for a younger model. All my saving and doing without is going to make his new wife quite comfortably off whereas I, the totally innocent party, am left with only a state pension of £57 a week to look forward to".

She paid quite literally for a considerable part of her husband's pension and she receives nothing. That is why I am sure that we all welcome the Minister's assurance in Committee that in future courts "must" and not merely "may" take into account pension assets. How the courts will do so is what we are discussing today.

As I am sure your Lordships are aware, there are three ways in which it can be done: first, by offsetting the pension against other assets where there are enough other assets to do so; secondly, by assessing the cash transfer value of the pension value so far accrued at the time of divorce and splitting it so that the two portions then twin-track either within the same scheme or in a different scheme and the husband and wife each have a separate part of the pension on which they can build; or, thirdly, earmarking, by which the first wife receives an appropriate share of the pension but not until retirement. That is a form of deferred maintenance.

Our preferred solution is reflected in Amendment No. 174; namely, that at the point of divorce, the courts should have the power to determine which of those three

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powers—offsetting, splitting or earmarking—is most appropriate and which best suits the circumstance and wishes of the spouses involved. That surely makes sense.

Offsetting may be entirely acceptable where there are ample assets. Splitting makes good sense when both parties are younger—perhaps in their forties—and have the ability to build up a core pension. Sorting out the matter once and for all at the time of divorce is a civilised way in which to ensure a clean break. However, earmarking, or deferred maintenance, may be appropriate where retirement is imminent.

Every family situation is different. The choice of pension provision may differ. I believe that the courts, which will build up a great deal of expertise, should have full discretion to do what is best.

Instead, the Government are proposing to allow the courts two rather than three of the powers, which is less than full discretion. As the Minister indicated in Committee, the courts will be able to offset. There is no problem about that. They will be able to earmark a flow of income on retirement if the amendment to be moved later today by the noble Baroness, Lady Young, is accepted, as I am sure it will be. But the courts will not be able to split the pension at the point of divorce. We should prefer them to have that power. Instead, the Government believe that the courts should have the more limited discretion.

Although the Government, in the form of the amendment in the name of the noble Baroness, Lady Young, and their own commitments, are not going as far as we should wish, they have nevertheless made a considerable and welcome advance on the current situation. The Government are to be commended although the way in which they are proposing to earmark—to defer maintenance—as reflected in the amendment of the noble Baroness, Lady Young, is, I believe, misguided. We have therefore tabled Amendment No. 175 which is effectively an addendum to—not a replacement of—the amendment of the noble Baroness, Lady Young.

Why do we think that that is necessary? The amendment in the name of the noble Baroness, Lady Young, means that at the time of divorce, courts will determine that when the man retires the wife would receive the appropriate portion of the pension assets so far accumulated. He may remarry and 20 years later, when he receives his monthly pension cheque, he is expected to post off a cheque each month to his first wife.

Many men will honour the agreement. But what if they do not? As I have been reminded helpfully by a former Lord Chancellor, the two great problems of family law are women who refuse access to their children and men who refuse to pay maintenance. I ask your Lordships to think of the wreckage of the Child Support Agency. Second wives may well resent a portion of their monthly portion income flowing back to the first wife. They may encourage their husbands to delay or resist paying it. First wives who have had no contact with their former husbands will be forced back into a financial relationship and financial dependence on him, which neither party wants. Under that system, they

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will both have to keep track of each other's lives—where he lives; where she lives; whether he is going away for a few months; whether he is going into hospital; moving house; or perhaps even marrying for a third time. He may default on maintenance payments or he may pay late. He may pay one month but not the next if he suddenly faces an unexpected bill. He may move to Spain. He may die. I presume that the first wife will then be dependent upon the second wife continuing to forward the cheques. What will happen if she does not?

I suggest that although the amendment in the name of the noble Baroness, Lady Young, is well intentioned and we support the direction of it, the procedures by which it is delivered will ensure, hassle, uncertainty and distress. Do we really wish to put first wives, by now elderly women, through all that? Do we really wish to turn a 75 year-old woman pensioner into a litigant endlessly chasing through the courts a former pensioner husband from whom she divorced decades ago? That will clog up the legal system and will make considerable demands on the legal aid fund. Let us think of the emotional, administrative and financial costs involved.

In practice, family courts are already creaking under the strain. Families have to wait a long time before their cases are heard. The courts rightly give priority to urgent cases. Maintenance is not often regarded as urgent and those cases will end up at the back of the queue. The first wife may simply give up and remain permanently dependent on state benefits. Let us think of the cost of that.

There is another way of delivering what the noble Baroness, Lady Young, proposes. I hope to persuade your Lordships of it. Instead of the pension fund sending a cheque to the husband each month, from which he is supposed to forward a cheque to his first wife, the pension scheme should do that. Let us enable the pension fund to be the agent for the payment of maintenance. Let it send out two cheques; one to the husband, and the other to the first wife. In this age of computers, that is relatively straightforward. The scheme members' records are flagged with court orders in just the same way as records now are flagged with such details as the requirement to pay the guaranteed minimum pension. Those flagged records transfer with him and the commitment passes from one set of trustees to another. I was told this morning by the pensions section within Arthur Andersen & Co. that that is an entirely manageable arrangement.

If we make that arrangement, the first wife gets paid by the fund and not by the former husband. That is the only difference between the amendment tabled in the name of the noble Baroness, Lady Young, and my addition to it. The first wife would receive exactly the same sum; but she would be sure of receiving it. She would not have to pursue her former husband, and virtually all the problems associated with the Child Support Agency would be avoided. We would also avoid the situation where second marriages are in financial contest with first marriages, with first wives chasing errant husbands through the courts for pension income. A large bill for legal aid would also be avoided.

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If the man does not remarry and dies before his former wife, there is no reason why she should not be regarded as the named beneficiary and receive her earmarked portion. In other words, if the pension scheme pays the cheque and not the husband, her fate would not depend on his fortunes. Above all, it would permit the clean break to continue. It would not force on both first wife and former husband an unwelcome continuity of the financial relationship. It respects the fact that we are not really talking about spousal maintenance at all, with its notions of dependency; we are talking about the first wife receiving as income a share of the capital asset that she helped build up while married to her former husband.

I repeat, we would prefer the courts to have full discretion as to which way they go; for example, offsetting, splitting or earmarking. But, if that is not acceptable to your Lordships, and if we are to go down the path of earmarking as suggested in the amendment of the noble Baroness, Lady Young, then I ask the House to support the version of earmarking by which the scheme rather than the former husband sends out the monthly cheque. We all dread a repeat of what happened with the CSA. By requiring the pension fund rather than the husband to deliver the divorce agreement, we would avoid most of those problems and achieve what we all want: greater fairness at the point of divorce. I beg your Lordships to press the Government to accept the addition that I propose to the welcome amendment tabled in the name of the noble Baroness, Lady Young. I beg to move.

3.30 p.m.

Baroness Young: My Lords, it may for the convenience of the House if I speak now to Amendment No. 225. In doing so, perhaps I may say at the outset how grateful I am both to my noble and learned friend the Lord Chancellor and to my noble friend Lord Mackay of Ardbrecknish for their help over the amendment and their sympathetic understanding of the problem. I should also like to say how pleased I am that the noble Baroness, Lady Hollis, and I have been able to work together on the amendment. I am especially pleased to hear that the noble Baroness will support my amendment which I believe marks a considerable advance in dealing with a very real problem.

When we last debated the matter, there was an incredible unanimity of view that something needed to be done to right an obvious injustice. Pensions are often the most valuable asset of a couple and, unless they are taken into account on divorce, the first wife can, and often does, find herself in a tragic situation, not infrequently dependent on social security in her old age or, should I say, after her retirement.

In that respect, I entirely agree with the noble Baroness, Lady Hollis of Heigham. In my entire public life I do not think that I have received quite so many absolutely tragic letters from women who have usually been left after 30 or 40 years of marriage and who find themselves on their retirement, if not on social security, in very straitened circumstances indeed; in fact, in circumstances which they never expected to experience.

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I have also received a number of letters from men. I should like to make it quite clear that anything I have said as regards this amendment, or previously, is not intended in any way to be an attack on men. They have said that, of course, there are cases where the wife goes off with a richer man and, therefore, why should they contribute. I hope that the amendment tabled in my name will be as fair as possible to both parties to a divorce.

However, there is just so much money to go round. Whereas the pension before divorce would have been for two people, now in all probability it will be for three. That is a fundamental fact that we have to face. As I understand it, under present law the courts are already under a duty to take loss of pensions rights into account on divorce settlements and have a wide range of powers available to them to compensate the party which loses such rights. But it is quite clear from my correspondence—and, I believe, that received by all your Lordships—and, I gather, from the early indications of the research being carried out by the Department of Social Security, that there is a wide difference between the law and the practice of it. In fact, what the law was meant to do is not actually happening.

I turn now to look at the amendment tabled in my name. It is an amendment to the Matrimonial Causes Act 1973 and would ensure that, where one or both parties to a divorce have pension rights, the court must consider their value. It would mean that the legal advisers for both parties to the divorce, as well as the couple themselves, would also have to consider pension rights. I believe that that marks a great step forward.

The proposed new Section 25B(1) specifies more fully the duty of the court to take into account pension rights when considering financial provision on divorce. The court would have to take into account any benefits under a pension scheme which a party to a marriage has or is likely to have in the foreseeable future. In addition, the court would also have to take into account any benefits under a scheme which a party would lose the chance of acquiring on divorce.

The proposed new subsection (2) clarifies what orders the court can make against the financial benefits which a party will receive or has received from a pension. In particular, it highlights the court's powers to make deferred maintenance orders and deferred lump-sum orders: deferred maintenance against the former spouse who has the pension rights (described as "the husband" for present purposes, although, of course, it may be the husband or the wife)—the husband's obligation to pay maintenance would come into effect when the pension was actually paid; periodical payments against a pension in payment or periodical payments (perhaps nominal only) which could be varied when the pension came into payment; deferred lump sums—the husband's obligation to pay the lump sum would come into effect when he received a lump sum or other financial benefit from the pension fund.

The court's powers in relation to pensions would be exercised in the context of its other powers regarding financial provision on divorce contained in Sections 21 to 27 of the Matrimonial Causes Act 1973. Apart from the proposed amendments relating to pensions, the

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discretion on making orders for financial provision will remain. That is important because it enables the court to reach an equitable solution in individual cases.

The court's duty to consider whether it would be appropriate for the parties' financial obligations to be terminated as soon after the divorce as the court considers just and reasonable—the so-called clean break principle—would remain. Where the court considers that compensation for loss of pension rights is appropriate in a particular case, it would consider whether a clean break could be achieved by, for example, ordering one party to transfer property or a lump sum to offset the loss. Where that was not possible, the court would have sufficient flexibility to decide that the clean break was inappropriate.

The proposed new subsection (3) refers to a related but separate point. At present, the Armed Forces legislation provides in effect that no order should be made by any court the effect of which would be to restrain the serviceman from receiving his service pension. Accordingly, there is considerable doubt as to whether a deferred lump sum or periodical payments order could be made against the serviceman's pension when it comes into payment. This anomaly is removed by the new Section 25B(3) in my amendment. It does this by making the powers given to the courts by the 1973 Act override the statutory provisions of the Army Act 1955, Sections 203(1) and (2) and similar legislative provisions in relation to the other Armed Forces which prevent court orders being made restraining a serviceman or woman from receiving pension benefits which he or she cannot assign.

Perhaps I may just add two or three other points. One point which must not be forgotten, which my amendment preserves, is the power of the court to vary financial provision orders under Section 31 of the Matrimonial Causes Act 1973. I think that this is very important. This power enables the court to vary an order for periodical payments, including payments which are secured. It means that if a wife—or a husband, whichever is the case—is concerned about the level of payments she is receiving, or will receive, perhaps because the pension is higher than was originally expected, she can apply to the court for the order to be varied. In exercising its powers the court is required to have regard to all the circumstances of the case, including all the factors mentioned in Section 25 of the 1973 Act. It will also therefore be under a duty to consider the pension rights as my proposed new Section 25B(1) will apply.

The circumstances of the case include any change in any of the matters to which the court was required to have regard when making the order to which the application relates. I think this flexible arrangement is valuable. It is not quite what is being proposed by the noble Baroness, Lady Hollis, but it means that the courts can take into account all the circumstances of individual cases, which are almost bound to vary in almost every case, and the changes which might take place in the pension of an individual person as he or she progresses through life. Therefore there may be a larger pension than was expected at the time of the divorce.

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I also wish to underline that this proposal is not retrospective. A number of people have written to me on this point. Of course it is a great sadness that those who have written these tragic letters will not be helped by the provision, but it will have the merit of helping people in the future. I believe we run ourselves into great difficulty as regards retrospective legislation and I would not wish to see that happen.

I also wish to make it clear—this has clearly not been quite straightforward to some of my correspondents—that the measure applies equally to men or to women. If the woman is the principal wage earner in the family and accumulates the pension, the same principles would apply to her as apply to the man in the case. I believe that there is one other merit of this provision. I have been in public life long enough to know that quite frequently when legislation is made it does not always work out entirely as was intended. None of us can be sure about that. This is a new field and there is great merit in proceeding one step at a time to see how it works before going further into matters. I would be the first to accept that in some respects this provision does not go as far as I would have liked, but it is a real step forward and I am grateful to my noble friends for the help that I have received on it.

While I am on my feet I should comment on the moving speech of the noble Baroness, Lady Hollis, when she spoke of how she would like to amend my amendment. I wish to answer one or two of the points that she has raised. As regards the Child Support Agency, I believe that its two weaknesses—there may have been others, but I have come across at least two—were, first, that its provisions were retrospective, which I think was a serious mistake, and, secondly, that the court did not have the freedom to take into account the individual circumstances of a case. Rules were laid down as to what someone had to pay and then it was found that the rules did not fit the case. Naturally enough people felt that the agency's provisions were unfair on both counts. I believe that is one of the difficulties which my amendment overcomes by giving the courts the opportunity to consider the different circumstances of the couple as life proceeds. A further difficulty concerns flexibility and the difficulties concerned with what has come to be called the "earmarking option". This would involve a pension scheme in identifying a portion of the husband's or wife's pension, as the case may be, calculated by use of the transfer value as if he were leaving the scheme and ring-fencing the amount for future payment via the scheme to the wife. In effect, pension rights would be regarded as deferred income.

I believe that my amendment offers a much greater flexibility of treatment by allowing the divorced couple to benefit from the wide-ranging powers of the courts which include, as I have already indicated, a clean break settlement by offsetting pension rights against other assets, a lump sum, compensatory payment or deferred maintenance order. The earmarking of pension rights, as described, would offer considerably less flexibility and could act to the detriment of both parties. For example, under the earmarking option, the ex-wife would effectively be in the position of greater dependency as

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the pension rights would continue to be in her former husband's name. She would have no say in any decisions taken by the former husband in respect of those pension rights and it would be open to him to make a transfer to another pension scheme, or a personal pension, without her agreement. She therefore might find herself in a worse position than she was at the beginning because by earmarking a portion of the accrued rights the eventual pension income for the former wife is effectively fixed, although it would be revalued within the normal rules of inflation proofing.

There is one other important point. The Government have made it quite clear that they will not agree to the splitting of SERPS or SERPS replacement benefits; namely, GMPs. As so many pension schemes are contracted out of SERPS, that would in any case mean that only a small amount of excess pension could be split. I understand that because of that the National Association of Pension Funds supports the amendment that I am moving which would avoid complicating still further the administration of pension schemes while making it clear to the courts that as part of the divorce settlement they should take into account future payments from the pension scheme once the husband has retired.

I do not wish to labour a number of points. I hope that the whole House will support the amendment that I have put down. I believe it marks a real advance. I believe that it will benefit many couples in the future and in particular the tragic cases of wives which I have mentioned. The more I have considered the matter, the more I think there are disadvantages in the amendment that the noble Baroness, Lady Hollis, has put down to my amendment, although I accept her sincerity in doing it. I beg to move.

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