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Baroness Hollis of Heigham: I thank the noble Lord for moving his amendment so clearly. I emphasise that the Government are committed to the welfare of children. However, I am not sure that pensions legislation is the appropriate time to make that point, any more than if we were considering legislation on children we should consider access to pension rights.

The amendment seeks to guarantee that children whose parents divorce should not suffer materially if a pension sharing order is carried out. I hope that I can persuade the Committee that it is not necessary.

The current divorce law, set out in the Matrimonial Causes Act 1973, already requires the courts to give first consideration to the welfare of a child of the family when deciding how to exercise their powers. The courts already treat the welfare of children as a priority in drawing up any divorce settlement. Pension sharing, where it is used, will just be another element in the settlement. It is simply a further means of helping the court in its efforts to achieve a fair outcome in all circumstances of the case--circumstances which are always unique and often very difficult.

As such, pension sharing is covered by the existing requirement in the Matrimonial Causes Act 1973. I am not aware of any concerns about that legislation, and I do not know of any case in which it has failed to

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provide adequate protection for children. Therefore, I do not believe that it is necessary to add further provisions especially for pension sharing.

The proposed reforms of the Child Support Agency, announced to the House in a Statement on Thursday, support the one-stop shop approach to the financial aspects of divorce proceedings by allowing the maintenance for the child to be part of the overall financial settlement, including spousal maintenance, matrimonial property and pension rights. Lawyers determining the child maintenance element will do so, of course, in the shadow of the child support formula which will protect the child, given that a party who is dissatisfied with the court's settlement may after a year, on two months' notice, go back to the CSA, which will collect the CSA rate. What matters is the income flow for a dependent child in the first family from the non-resident parent. We think that that is best done through broader-based child support maintenance rather than the earmarking of a pension. The point is particularly relevant to the self-employed whose income may be far greater than any potential pension pot.

I understand the sentiments underlying the amendment. Protecting the interests of children of the family is, and should remain, the first consideration of the courts. But we believe that they are already doing that. We think that the position of children will be further protected through the proposed reforms of the CSA. We do not believe that the amendment would add anything to the satisfactory safeguards already in force. We have no reason to believe that the current situation is unsatisfactory. Therefore, I invite the noble Lord to withdraw the amendment.

9 p.m.

Lord Astor of Hever: I am grateful to the Minister for that explanation. The noble Baroness mentioned the Matrimonial Causes Act 1973 to which I referred. We were looking for a greater protection of children. However, I understand the points she made. We shall consider the points made about the CSA. In the meantime, I beg leave to withdraw the amendment.

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

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

Line 103, after ("order") insert ("following an appeal")

The noble Lord said: This is a probing amendment designed to ascertain whether the provisions of Section 31(4D) inserted by paragraph 6(4) of Schedule 3 to the Bill are designed to deal with appeals or with any variations more widely. I look forward to the Minister's clarification. I beg to move.

Baroness Hollis of Heigham: The amendment seeks to change those provisions in new Schedule 3 to the Bill which deal with the variation of pension sharing orders before they become effective. Amendment No. 58K would limit the application of a stay period to a pension-sharing order which had been varied on appeal, but not if it had been varied other than on appeal. Our

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proposals allow for a stay period to apply in both situations. There may understandably be some confusion on the issue and it may be helpful if I set out the circumstances in which it is possible to vary a pension sharing order other than on appeal.

As noble Lords will be aware, appeals can be made against the principle that a pension-sharing order should be made; or against the content of the order. But it is also possible for an application to be made to vary an order. Such an application does not question whether it was right for a pension sharing order to be made, but seeks to vary its terms.

A court might agree to a variation, for example, where other assets came to light after the order had been made but before it became effective. A pension sharing order might also be varied if the circumstances of one or other of the parties to the marriage changed significantly before the divorce was made absolute, perhaps as a result of severe illness.

In those cases, the pension-sharing order, as varied, would take effect immediately so long as the decree absolute had been granted. This would remove the opportunity for either the member spouse or former spouse to challenge the terms of the variation. We believe that it is appropriate for there to be a stay period in the case of variations as well as when the variation arises as a result of an appeal.

I hope that on the basis of that explanation, the noble Lord will be able to withdraw his amendment.

Lord Astor of Hever: I thank the Minister for that explanation. It is a technical point and it is helpful that the Minister has set out the position so clearly. We shall consider with our advisers the points she makes. In the meantime, I beg leave to withdraw the amendment.

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

On Question, Amendment No. 58 agreed to.

Schedule 3, as amended, agreed to.

Clause 20 agreed to.

Clause 21 agreed to.

Schedule 4 [Amendments of sections 25B to 25D of the Matrimonial Causes Act 1973]:

The Deputy Chairman of Committees (Baroness Lockwood): In calling Amendment No. 58L, I have to point out that if this amendment is agreed to, I cannot call Amendments Nos. 59 or 60 under the pre-emption rule.

Lord Astor of Hever moved Amendment No. 58L:

Page 100, leave out lines 22 to 27

The noble Lord said: In moving the amendment, I speak also to Amendments Nos. 70B, 70C and 70D. These are also probing amendments to clarify the Government's position on allowing earmarking orders affecting lump sum death benefits even though a pension sharing order was being made in respect of the same member.

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Currently the Bill prevents a pension sharing order being made at the same time as an earmarking order in respect of the same member and the same scheme. Thus the former spouse would have the choice of either a pension-sharing order or an earmarking order. As regards retirement benefits, that is reasonable, but there are circumstances where the former spouse would want an earmarking order in respect of the lump sum death benefit in addition to a pension sharing order. A typical case might be where the member had not been in the pension scheme for very long so that the value of his accrued benefits was not large, and therefore the value of the pension-sharing order to the former spouse would not be large. The lump sum death-in-service benefit for such a member could be much larger than the value of his accrued pension benefits, and a pension sharing order would not apply to the lump sum death benefit.

On the other hand, an earmarking order can apply to the lump sum death benefit as well as the pension and/or lump sum which the member will receive on retirement. Will the Government amend the Bill to allow an earmarking order relating to a lump sum death benefit to be made at the same time as a pension-sharing order in respect of the same scheme? I beg to move.

Baroness Hollis of Heigham: As we have heard from the noble Lord, the aim of these amendments is to permit a spouse to benefit from a pension sharing order and a lump sum death benefit earmarking order at the same time in relation to a single pension arrangement.

Amendment No. 58L would amend paragraph 2 of Schedule 4 to the Bill. That paragraph will insert a new restriction into Section 25C of the Matrimonial Causes Act 1973. This restriction will prevent the court in England and Wales from making a lump sum death benefit earmarking order under Section 25C of the Matrimonial Causes Act 1973 if the pension arrangement against which the earmarking order was to be made was either already the subject of a pension sharing order in relation to the marriage or had already been shared between the parties to the marriage. I should add that the Bill does not prevent the court making a lump sum death benefit earmarking order in favour of a second spouse if the pension arrangement in question has been shared by a first spouse. Amendments Nos. 70B to 70D would permit pension sharing by agreement of a pension arrangement that has already been the subject of a lump sum death benefit earmarking order.

I think the problem with the amendments is that they will devalue the benefits of pension sharing. We want to encourage "clean breaks" but we accept that, in some cases, earmarking will be fairer and the choice of the couples concerned. We consider that it is reasonable to ask spouses to choose between earmarking and sharing in relation to a single pension arrangement. Permitting both in relation to the same pension arrangement--but to different bits of it--and the same marriage will only encourage complication and expense.

I believe that the Bill strikes a balance between the clean break implicit in pension sharing and the continuing relationship inevitably intertwined with

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earmarking orders. The amendments would give a spouse the opportunity to pull in these contrary directions at once. I do not think that would be sensible, and I therefore hope that the noble Lord will feel able to withdraw his amendment.

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