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Baroness Ramsay of Cartvale: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.28 to 8.30 p.m.]

Welfare Reform and Pensions Bill

House again in Committee on Schedule 3.

Lord Astor of Hever moved, as an amendment to Amendment No. 58, Amendment No. 58C:

Line 35, leave out from ("marriage") to second ("the") in line 36

The noble Lord said: Amendment No. 58C covers one of the Opposition's main concerns about the Government's proposals. They have made much of their claim that pension sharing would be a one-off, clean break between two parties in a divorce. However, as they stand, the Government's proposals leave it open for there to be a subsequent application after the initial

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divorce order is made. We believe that it is utterly inappropriate for a party with a pension that may be subject to a sharing order to be unclear at the time of divorce whether a subsequent order may be made against them.

The amendment is designed to ensure that there is only one opportunity for a pension-sharing order to be made. We have based this on the principle that it cannot be right for there to be an opportunity for a retrospective application after a divorce settlement. The principle of equity is fundamental, it is alleged, to the Government's proposals. We do not, therefore, believe that it is equitable for there to be the possibility of sharing to take place, except in response to an application being made before the divorce order.

In the other place at Committee stage, the Under-Secretary of State said that this amendment was too prescriptive in that it set a time-frame in which it might not be possible for a party to initiate a pension sharing order. The specific instances he cited were serious illness or domestic violence. Perhaps a way of preserving our principle of opposing retrospective applications could be addressed by instituting a time limit after which retrospective applications may not be made.

I should be grateful if the noble Baroness could indicate whether she shares our fundamental concern here and what moves the Government may take to allay it in a practical context. I beg to move.

Baroness Hollis of Heigham: As we have heard, the amendment seeks to change those provisions in the Bill which specify when a court in England and Wales can make a pension sharing order.

Under the Matrimonial Causes Act 1973, decisions about financial arrangements are often--indeed, I was assured in the majority of cases--not reached until after divorce. A pension is just one of the assets which are to be dealt with on divorce and it is therefore necessary to enable pension sharing orders to be made to the same timetable.

The new Section 24B of the Matrimonial Causes Act 1973 is entirely consistent with the existing provisions of that Act, relating to when the court may make other types of ancillary relief orders.

Under the 1973 Act, a divorcing couple are not required to settle their financial arrangements before they get divorced. It is fairly common for those arrangements to be settled after divorce. I do not believe that it would be right to remove the additional flexibility that pension sharing will bring in a large number of cases. For example, it would require that financial arrangements, which would otherwise not have been dealt with until after the divorce had been completed, would have to be completed before the divorce in order to meet the qualifications of only one part of the assets--the pension. I hope that on the basis that all we are doing is protecting the existing situation under the Matrimonial Causes Act and the flexibility that people have, the noble Lord will withdraw his amendment.

Lord Astor of Hever: I thank the Minister for that clarification. I understand the point she makes about

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flexibility and we will carefully study in Hansard what she said. In the meantime, I beg leave to withdraw the amendment.

Amendment No. 58C, as an amendment to Amendment No. 58, by leave, withdrawn.

Lord Astor of Hever moved, as an amendment to Amendment No. 58, Amendment No. 58D:

Line 44, after ("a") insert ("previous")

The noble Lord said: I wish to speak to Amendments Nos. 58D to 58H. This is an area where the Opposition has serious reservations about the Government's proposals. The principle of our amendments is straightforward. It allows the sharing of a pension asset on only one occasion for the scheme participant. The purpose is to ensure that, in an age where, sadly, divorce is becoming ever more prevalent, there will not be the possibility of a further sharing of the asset when an individual remarries after the pension sharing order has been made.

In the other place at Committee stage the Government accepted the principle that if a pension was reduced by earmarking, it should not be subject to subsequent splits. The possibility of discrimination between the first and any subsequent spouses was accepted.

If an asset is split repeatedly on divorce, there is the real danger that an individual may be left with a pension that is utterly inadequate for their retirement. Indeed, given the Government's miserly proposed changes to the topping up of the scheme participant's pension after sharing, this is another serious blow to the institution of marriage.

The Government have stated that they do not believe that pension sharing will impact a couple's decision to marry. However, Malcolm Wicks, Labour Member for Croydon North in the other place and a member of the Social Security Select Committee, said that pension splitting could financially disadvantage men who had already divorced once and then started a new relationship. He said:

    "The fear of having to share their already diminished pension rights with another woman, should a second marriage end in divorce, may make them feel it is not worth marrying again. A man who has had half his pension fund taken away at divorce and who is living with another woman may find she wants to marry him but his accountant may advise him against it". The matter of apportionment of a pension will clearly be for the courts to decide. It tends normally to be the case, though, that jurisprudence evolves through repeated practice. The courts may well determine that, if a pension sharing order is appropriate in principle, the amount apportioned for a scheme participant should be the same in each case of divorce. Therefore, in the case of a subsequent marriage and divorce this could be overwhelmingly detrimental to a person's retirement planning, and particularly unfair where the individual may not be the cause of the divorce.

We are concerned with the diminution of the pension asset which, if repeatedly reduced, would mean some individuals losing all incentive to save for their retirement. Repeated pension sharing orders might

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render the asset almost worthless. The strength of our amendment is that not only does it address this problem but it is also transparent. A second or third spouse would know that the asset had been previously shared prior to the marriage. This is the only sensible course to pursue if the Government are serious about equitable treatment of scheme participants in an age of ever-increasing divorce rates.

The Opposition appreciate that this is a complex and emotive subject. Pensions were never designed to be split. But we are concerned that the supposed principle of equity under which pension sharing is being introduced is seriously compromised by the possibility of multiple sharing of a single pension asset. It is with that serious reservation in mind that I look forward to some reassurance from the Minister. I beg to move.

Lord Goodhart: Certainly, I understand the idea behind the amendment just moved by the noble Lord, Lord Astor of Hever, which addresses a problem. However, in principle I find it difficult to support the amendment as it stands because it produces a number of anomalies. Let us say that a young man has started his pension at 25, marries and is divorced by the age of 30. For the rest of his life any increase in that pension will be completely immunised against a claim by a second wife who may have been married to him for a quarter of a century. There is an anomaly as between the person who continues with the same pension and someone who moves jobs and starts another good occupational pension scheme with a new employer. That will not be immunised, whereas the old one will be.

I believe that the right way to deal with this undoubted problem is through the courts. I hope that one of the factors that the courts will take into account when deciding how to split a pension is how much of it was earned while the couple were married or living together. Therefore, if there was a second relatively brief and unsuccessful marriage the wife would not normally expect to get away with a significant proportion of the pension fund built up before the marriage began. But it seems to me that this obvious problem should be dealt with through the discretion of the courts rather than by writing this provision on to the face of the Bill.

8.45 p.m.

The Earl of Clanwilliam: I take the points raised by the noble Lord, Lord Goodhart, in two senses. First, I agree with my noble friend that the word "previous" is important in this context. It means that the pension at the time of divorce will be stopped and halved, or whatever fraction is appropriate, and those proportions will continue. Therefore, it does not matter whether either party takes out a subsequent pension. In this amendment the word "previous" refers to the particular pension and the state of its accumulation at the time of divorce.

Secondly, the noble Lord, Lord Goodhart, referred to the role of the judge. This is related to my earlier remarks in relation to new Section 40A(4). The judge dictates how the assets should be broken up; it is he who is in a position to ameliorate the situation and is aware of all the assets of the two parties. Therefore, he can

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ameliorate the situation by agreement, not by the arbitrary system as proposed in the schedule. Therefore, I support my noble friend Lord Astor and urge the Minister to use new Section 40A(4) and allow the judge to make the disposition in this matter.

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