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Baroness Turner of Camden: My Lords, before my noble friend sits down, is she aware that, according to highly publicised statistics, 65 per cent of all pensioners have an income that is much less than the income tax threshold? That means that a lot of people are quite poor.

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Baroness Hollis of Heigham: My Lords, the income tax threshold is appropriately privileged to pensioners. But I repeat that since 1979 pensioner income has risen by 70 per cent. I could go on, but what has clearly happened since 1979--I know my noble friend will not disagree with me--is that in almost every household structure in the country we have seen inequality widen. Whereas if we asked back in 1979 who were the poor, the answer would have been a pensioner; if we asked today, the answer is a child.

What has happened is that four-fifths of pensioners have done relatively well since 1979 by virtue of occupational pensions, access to savings and the flow of income from that. But the bottom fifth have been left behind--and they are the ones we are seeking to help. If we help all, we cannot help the poorest, and that is our priority.

Baroness Castle of Blackburn: The Minister has not pointed out to the House--I feel she owes it to us to do so--that when increasing any services across the board (say, child benefit) and therefore giving to some who do not need it, we rely on getting a good deal of it back through the tax system. That is point number one which my noble friend always ignores in her figures; the fact that the well-to-do have to pay tax. In my view, they should be paying more than at present, but even allowing for the present levels, we get some of it back. Her statistics in that regard therefore are one-sided. She also always implies that this sort of accumulative cost (about which she warns us) is taking place against a background of expanding national income and as a percentage of the national wealth and is, therefore, manageable.

It is too late for us to continue this ding dong. I know the Minister will appreciate that I am profoundly dissatisfied with her answer, as is Lady Turner. But I shall withdraw the amendment because at this late hour it is absurd to expect the House to vote on anything. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 54 and 55 not moved.]

Schedule 2 [Pensions: miscellaneous amendments]:

Baroness Hollis of Heigham moved Amendment No. 56:

Page 92, line 34, after (“months") insert (“immediately").

On Question, amendment agreed to.

Schedule 3 [Pension sharing orders: England and Wales]:

Lord Goodhart moved Amendment No. 57:

Page 96, leave out lines 16 to 20.

The noble Lord said: My Lords, I shall deal with this amendment as quickly as I can. Amendments Nos. 58 and 59 and 67 to 69 are grouped with Amendment No. 56.

I begin by saying that this is the first group of amendments that deals with the subject of pension

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sharing, which takes up a large part of this Bill. It is in fact remarkable how few amendments there are in this part of the Bill and that is a tribute to the careful and detailed spadework which has been done on these proposals under the aegis of the present Government and their predecessors. It is now clearly an idea whose time has come.

Amendment No. 56 deals with one minor defect in the Bill. Under the Bill it will not be possible to have, in respect of the same divorce, both a pension-sharing order and an earmarking order, the difference between them being that a pension-sharing order gives the spouse part of the fund which is set up to provide a pension, whereas an earmarking order provides the spouse with part of the pension itself or other benefits when they are paid.

We accept that pension sharing and earmarking are normally alternatives, but there may be cases where both kinds of order are appropriate. Obviously, you cannot have a sharing and an earmarking order in respect of the pension at the same time, but there is no practical reason why you cannot have a sharing order in respect of the pension and an earmarking order for non-pension benefits, such as the death in service benefit. This has been pointed out in submissions to the Social Security Select Committee in the other place by the Association of Pension Lawyers and by the Solicitor's Family Law Association.

The earmarking of a death in service benefit may be valuable where a husband is, for example, required to contribute to the maintenance of the children of a marriage. In such a case, if the wife has no access to the death in service benefit, serious hardship may be suffered after the husband's death. However, the death in service benefit has no cash equivalent transfer value, or very little, and it cannot therefore be adequately covered by including it in the pension sharing order. Therefore, in appropriate cases, which would probably be relatively few, why cannot a pension sharing order together with an earmarking order be allowed for non-pension benefits?

Lord Astor of Hever: My Lords, unfortunately we on this side of the House cannot support Amendment No. 57 moved by the noble Lord, Lord Goodhart. We feel that it would be a mistake to remove these lines from the Bill, as it would create uncertainty. The lines in question prevent an order being granted for a second time against pension benefits, with which we agree. The amendment would allow changes to pension-sharing arrangements, which are already agreed and in place. We cannot support such a change.

Similarly, we cannot support Amendment No. 58, which would remove the ability of a court to vary an order after it is made and before a divorce is absolute. We believe that pension-sharing arrangements should be finalised at the time of divorce and not before.

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Baroness Hollis of Heigham: My Lords, the purpose of Amendments Nos. 57 and 68 is to remove the restrictions in England and Wales on pension sharing in relation to earmarked pensions and on earmarking pensions that have been shared. Similarly, in Scotland, Amendment No. 69 would enable a pension-sharing agreement and an earmarking order in respect of the same pension arrangement.

Under the Bill it will not be possible to pension share a pension arrangement which is subject to an earmarking order. As the noble Lord, Lord Astor, rightly pointed out, this is not an arbitrary restriction. It is to protect former spouses and to prevent them from losing out through no fault of their own. If, for example, an earmarking order is made of, say, 50 per cent of the pension payments to be made under a pension arrangement, the value of those payments will fall by one-half if the pension rights out of which they are to be paid are shared on a 50-50 basis. That would not be fair.

I turn now to the restriction on earmarking. The Bill provides that where the parties to the marriage have already shared a particular pension arrangement, the court may not make an earmarking order in relation to that arrangement and those parties. The justification for the restriction is that it will promote the “clean break" on divorce. This principle underlies the whole of the pension-sharing legislation. Put simply, divorcing spouses have to make a choice whether to share, earmark or off-set the value of their pensions. The policy prevents the same spouse coming back for several bites of the cherry while permitting subsequent spouses to have a bite of what is left of the cherry after the previous pension share.

It would seem odd to me--and, indeed, unreasonable--to put a spouse in a position where his or her original pension entitlement had been divided and shared with a former spouse, probably significantly reducing the benefits payable to the original pensioner and any new spouse, and then to provide that even those remaining benefits could be earmarked in favour of the former spouse with whom the pension had been shared and who had thereby been given his or her own pension. That seems to us to be far too much.

The noble Lord, Lord Goodhart, wondered whether we could have a concession for the earmarking of death in service benefits alone. That is a contingent benefit which is unlikely in many, or in most, cases to be paid out. No former spouse could depend on receiving such a benefit and such benefits are not included in the cash equivalent transfer valuations of pension rights. We believe that to allow death benefits to be earmarked when a pension is shared would not be consistent with the

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encouragement of clean breaks. It would also be unfair to second families. If a pension has been shared and a new pension created in favour of a former spouse, why should that spouse, rather than any new spouse or family, also benefit from the death of his or her former partner?

Therefore, I am afraid that we do not accept the push of the noble Lord's position. However, if I have misunderstood him in any way I should be glad if he would write to me and we can pursue the matter through correspondence. In the light of those remarks I hope that the noble Lord will be willing to withdraw his amendments.

1.30 a.m.

Lord Goodhart: My Lords, I believe that the noble Lord, Lord Astor of Hever, has somewhat missed the point here. What I am really getting at is not so much the possibility of making orders on two different occasions--which I agree would be unsatisfactory--but, more importantly, what is excluded from the Bill is the possibility of making those orders on the same occasion; that is, on the occasion of the divorce making both the pension sharing order and an earmarking order in respect of non-pension benefits, in particular the death in service benefit, although there could be others. I believe that that is unnecessary and could cause hardship in some cases. I certainly think that it is unlikely to be used frequently but I do not think that it is either necessary or desirable to exclude it. However, in view of the time of night and the fact that this is not an amendment of the first order of importance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Amendments Nos. 58 and 59 not moved.]

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