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Lord Goodhart: I believe that it was my amendment.

Baroness Hollis of Heigham: I do not challenge the noble Lord's memory; I am sure that his knowledge about the ownership of his property is far better than mine. However, that proposal was supported by my noble friend Lady Turner, who has often pressed me on this point in the past and has spoken to it very effectively. Obviously, this does not arise in the case of the state second pension. It is an unfunded pension and therefore the employee's contribution does not arise. Our research suggests that as to the stakeholder pension, which is funded, between two-fifths and three-fifths of employers appear to be willing to contribute. I suspect that that will depend on the other versions of pension schemes that employers currently offer and what options are available. That certainly is what our research seems to suggest.

We have considered whether the employer's contribution should be made compulsory, but even occupational pension schemes are not compulsory. To make the employer's contribution compulsory when he is required to provide a stakeholder pension scheme would probably, we thought, be a step too far.

As for the point raised by the noble Earl, Lord Clanwilliam, that individual employees should be required to contribute to a pension scheme, we entirely

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share his sentiments, as I am sure does the whole Committee. Our difficulty is that, frankly, the poorest people cannot afford to contribute to a pension scheme at the same time as they are seeking to juggle a mortgage and the costs of young families. Equally, it is difficult to see how one could make compulsion run for someone who is self-employed and who sees it as more appropriate to invest the money in the business rather than a pension plan. The Government have not finally closed their mind on that point. We shall keep the issue open and representations will continue to be made to us. At the moment, it appears that we would not be able to help those who most need it, because they cannot afford it and are therefore dependent on state support, such as the minimum income guarantee.

As I have said, we are legislating for stakeholder pensions. We will introduce a new state second pension which will ensure--together with what we know about women's entry into the labour market and the new floor of the national minimum wage--that the problem of poorest pensioners being dependent on income support will gradually wither. We believe that in the meantime it is right that they should be our highest priority. As a result, I hope that my noble friend Lady Turner will withdraw her amendment.

Baroness Turner of Camden: I thank my noble friend for her response, but she will not be surprised to learn that I disagree with her. There is a philosophical difference between us. As I made clear earlier, I am a supporter of a system of social insurance, in which everybody pays a contribution and a minimum provision is made for everybody, but those who are well enough off can plus it up--as was the case with the Castle Plan. The basic pension should be sufficient to afford reasonable maintenance even for the poorest pensioners. We have moved significantly away from that concept and I deeply regret that.

The provision in the Bill is not the policy on which the Labour Party went to the election in 1992, when we proposed to the electorate that we would make SERPS into a national pension plan to which the self-employed could belong and which would gradually restore the earnings link to the basic pension. I would still like to see that plan introduced, but we have moved substantially away from it and we now have a very different set of proposals before us.

I am grateful to the noble Lords, Lord Goodhart and Lord Higgins, who have contributed to the debate. I agree with the noble Lord, Lord Goodhart, about compulsory second-tier pensions. There should be a system under which the employer pays something and the employee also has to pay something. Without that, many people will reach retirement age with inadequate pension provision. I was not aware of the efforts made by the noble Lord, Lord Higgins, back in 1964, but I noted that he was sympathetic to some of the points that I made, even though he does not agree with the restoration of the earnings link.

I do not agree with the Government's approach to the whole issue. The poorest pensioners will not benefit as much as we would like to see them benefit, even with

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the new proposals. I do not like the fact that the scheme depends on means testing, because many people will not wish to put themselves forward for means-tested benefits for the reasons that were advanced earlier in the debate by my noble friend Lady Castle. However, there is little point in pressing the amendment at this time. I shall consider what has been said and decide whether a version of it should be advanced on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Clause 19 [Orders in England and Wales]:

Lord Astor of Hever moved Amendment No. 45:

Page 24, line 31, leave out ("have effect") and insert ("not have effect until the Law Commission have undertaken a review of the Matrimonial Causes Act 1973 and have reported on the extent to which it is appropriate to give legal force to pre-nuptial agreements.")

The noble Lord said: This is a probing amendment. In the light of the recent confusion over the Lord Chancellor's proposals for no-fault divorce, we wish to clarify the Government's position as it relates to pension sharing in the Bill and possible future legislation to recognise prenuptial agreements.

I appreciate that the matter is currently under review by the Lord Chancellor's Advisory Group. Much concern about the potentially unfair aspects of pension splitting would be removed if individuals could choose a prenuptial agreement to govern what would happen in the event of divorce. We feel that, given the potential impact on the sharing of family assets on divorce, this matter should be debated.

The Government have consistently stressed that pension-sharing orders will be only one option available to the courts when considering the division of assets on divorce. Given the substantial nature of the pension asset when compared to other financial assets, it is a near certainty that pension-sharing orders will become common in practice. While prenuptial agreements are a relative novelty in the United Kingdom, the Government's move to make the sharing of assets on divorce more statutory would seem--certainly to me--likely to encourage their growth. I would welcome the Minister's view on that matter and an indication as to whether the Government are of the opinion that prenuptial agreements would make a fundamental difference to pension sharing.

The Earl of Buckinghamshire: I rise in support of my noble friend Lord Astor. I wish to make three points. First, I wish to confirm that the assets involved in pensions are significant. If people own a house, the pension is probably the second most significant asset that they build up. If people unfortunately do not own a house, the pension will be the most significant asset.

Secondly, prenuptial agreements are relatively rare in this country. I suspect that they will continue to be relatively rare in the future and will be used mainly for second marriages where children from the first marriage have aspirations to some assets.

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Thirdly, it would be interesting to know whether we could learn anything from what happens in other countries--for example, the United States of America, Canada and Australia. I understand that in Canada a prenuptial agreement can be taken into account by the courts if it reaches certain standards. The situation in the US is less clear cut and pension splitting seems to be more a matter for negotiation. Where it is taken into account, it is heavily legislated for under regulations for both approved and unapproved schemes.

Having said I wished to make three points, I shall make a fourth by congratulating my noble friend Lord Astor on having the courage to go into two subject areas--divorce and the complexities of pensions in the Bill.

6.30 p.m.

Baroness Berners: I, too, support the amendment moved by my noble friend Lord Astor of Hever. I wish to ascertain the Government's attitude to the pre-nuptial agreements which now affect pension sharing as opposed to the financial arrangements on divorce.

The Earl of Clanwilliam: The noble Lord, Lord Astor of Hever, has a galaxy of support.

If discussion on pre-nuptial agreements is taking place with the Lord Chancellor, it seems sensible for the sharing of the family assets, which is the major activity, as my noble friend Lord Buckinghamshire said, to be referred back until such time as findings of the Lord Chancellor are delivered to us.

Baroness Hollis of Heigham: I am very sorry about this. The amendment would delay the introduction of pension sharing almost indefinitely, if the outcome of the Law Commission review on pre-nuptial agreements had, first, to be determined before we could proceed with this. In the White Paper on pension sharing, published in February 1997, the present Opposition said simply, "We will legislate as soon as possible".

The real impetus for pension sharing came from all around this Chamber. I remember vividly the debates in which not only Lady Seear, but also the noble Baroness, Lady Young, and others contributed. The Government are determined to see the project through. I have been teased on more than one occasion, perfectly reasonably, from the official Opposition Benches about not having proceeded more expeditiously with pension sharing, given that we made such a noise about it while in opposition. Yet the effect of the amendment would be to delay it further.

The amendment would prevent the implementation of pension sharing until the Law Commission had undertaken a full review of the Matrimonial Causes Act 1973. There are two main points to make. First, the resources and expertise of the Law Commission are fully committed to reviewing other areas of the law which urgently need reform. The commission has recently agreed a new programme of work with the Lord Chancellor which was announced on 17th June. The focus will be commercial and company law, in particular looking at developing a commercial code

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setting out the principles and rules governing commercial transactions. That is regarded as the highest priority at this time. Issues associated with that have been raised frequently in this House. The programme contains no family law issues. So without additional resources there would be no scope for the Law Commission to commence a review of the Matrimonial Causes Act.

Secondly, and more importantly, there is no evidence of general dissatisfaction with ancillary relief provisions of the Matrimonial Causes Act which would justify such a review. Past governments, as well as the current Government, have adopted an evolutionary approach to this area of the law. Pension sharing is one such example.

Finally, the amendment would not delay the implementation of pension sharing in Scotland. I am sure that if the noble Lord, Lord Astor, were minded to pursue the point he would wish to ensure that there was parity of treatment across the United Kingdom; otherwise we should have pension sharing in Scotland but not in England and Wales.

The amendment specifically refers to giving legal force to pre-nuptial agreements as a justification for commissioning the review of ancillary relief law which the noble Lords seem to have in mind, in the belief that pension sharing would lead to more pre-nuptial agreements--I presume that that is the thinking underlying it--as a possible way of protecting assets from subsequently being available to the matrimonial pot. We have no reason to think that. Pensions are already part of the financial settlements on divorce. As noble Lords will recall from those debates in 1995, they can be offset against other assets, or earmarked currently. What we are doing, and what the House was persuaded to say to the other House, was that pension sharing was an additional choice to couples and to the courts in seeking to achieve the fairest disposition of assets at the point of a marriage break up, and the financial settlement with divorce.

It may not always be the right solution. Offsetting, or earmarking may be more appropriate. Nor do we say that the division has to be 50:50; it can be 10 per cent or 90 per cent depending on the family circumstances. But to withhold from the financial pot what can be for many people their biggest financial asset, the pension--greater even than the matrimonial home--was demonstrably unfair in particular to those older women who had invested their lives often in supporting their husbands and their husbands' careers. That was why this House pressed the issue on the other place. That is why I should be sad to see further delay when so many of the associated pressure groups such as Fair Shares, are urging us to go faster rather than more slowly--and, perhaps I may say to the noble Lord, Lord Goodhart, even to contemplate making pension sharing retrospective.

Given that pressure, I should be sorry if we had to pursue this amendment. It is the case that pre-nuptial agreements have been the recent subject of public consultation in our paper, Supporting Families. As chairman of the ministerial working group on the

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family, the Home Secretary recently published a summary of the responses to that paper, including those on pre-nuptial agreements. No decision has been taken yet on whether the proposal to make pre-nuptial agreements legally binding will be pursued further. But I am sure that as the Lord Chancellor considers the way forward, he will note noble Lords' suggestion that the Law Commission should be asked to consider this issue in detail.

To conclude, I do not believe that there is a case for delaying the introduction of pension sharing. Many people out there, I have to say mainly women, would not thank this Chamber for delaying their right of access to some decent security, in particular as they come towards old age. I believe that this House will welcome its implementation during the lifetime of this Parliament. We hope to implement it around the year 2000. I do not believe that this will put additional pressure on pre-nuptial agreements, but if that were to be the case I am sure that our consultation exercise, and the reflection on the issue that is currently under way, will take those points on board. If necessary, we can look at the matter then. Knowing as I do that the noble Lord supports the principle of what we are doing, I hope that he would not wish to delay the matter further.

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