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7.12 pm

Lord Skelmersdale moved Amendments Nos. 69 to 76:

(a) requests for such loans received from the Board;(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme (as defined in section (Transfer of unclaimed assets) (“the Scheme”));(c) the level of any claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.(a) the obligations of the Lifeboat Fund;(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme; and(c) the level of claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.(a) six years, in the case of the chairman, and(b) four years, in the case of other members. (a) to obtain such information about such classes of unclaimed assets as may be prescribed by the Secretary of State by regulations;(b) to provide the Secretary of State with that information and any other related information held by the Agency which the Secretary of State may from time to time require;(c) to administer the scheme to be established by virtue of section (Transfer of unclaimed assets).”(a) to a fine not exceeding level 5 on the standard scale; and(b) in the case of a continuing offence, to an additional fine not exceeding £200 for every day during which the offence continues.(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both; and(b) on summary conviction, to a fine not exceeding the statutory maximum.”(a) a definition of those unclaimed assets to which the Scheme applies, including the extent to which the Scheme is applicable to assets whose ownership is known, or can be determined;(b) the transfer to the Lifeboat Fund of a prescribed proportion of such unclaimed assets as the regulations shall prescribe, and the manner and timing of such transfers;(c) the transfer to the Lifeboat Fund of liability for any claim in respect of assets transferred under the Scheme to the Lifeboat Fund;(d) penalties to be imposed on any person holding assets prescribed under subsection (1) or (2)(b) who fails to transfer them or such proportion of them as is prescribed in accordance with the Scheme.

On Question, amendments agreed to.

Baroness Hollis of Heigham moved Amendment No. 77:

The noble Baroness said: I shall speak also to Amendments Nos. 78 and 165. We move on to a different subject, connected with the previous one only because it stems in part from the 1994-95 Bill. It covers leftover business not just from then but from the Welfare Reform and Pensions Act 1999, which established pension-sharing on divorce, after many years of campaigning around the entire House led by the much missed Baroness Young and Baroness Seear.

Why are these amendments necessary? Essentially, if a British couple retire to Spain and a few years on get divorced, their only assets may be the home and an occupational pension. Part III of the Matrimonial and Family Proceedings Act 1984 allows English courts to make property adjustment orders following a foreign divorce. A wife can still get a fair share of the home even though the divorce between two British citizens is taking place abroad. But sharing those assets would not include sharing the pension, even though it was earned in Britain and provided by a British company. Many EU and other countries cannot legislate to make pension-sharing orders, and even if they do they are invariably not recognised by UK pension arrangements and so are not implemented. I shall give an example. A couple I was told about moved to France, using their savings and family home to buy a new house there. No further assets apart from the husband’s occupational pension were available. He then left her, they sold the house, shared the proceeds and divorced in France. The French court cannot make a pension-sharing order, and even if it did it would not be honoured by British companies. The wife is in her 60s and finding it hard to get a maintenance order from the French court. She is struggling to survive on casual work as a gardener.

I suggest to my noble friend that a simple amendment is needed to put pension-sharing on the same footing as the former matrimonial home, so that the jurisdiction is dependent on where the asset is based not on the residence and domicile of either of the parties. This is a loophole left over from the previous legislation, and I am as guilty about that as anyone, that is for sure.

A second issue, unconnected to the foreign jurisdiction point but also left out of the 1999 Act by mistake, is the need to be able to make an order attaching death-in-service benefit, which is a lump sum, and a pension-sharing order in relation to the same pension. It is becoming increasingly common that where the court orders payments of spousal or child maintenance, the recipient, usually the wife, will seek to ensure that the payment is covered should the former husband die in service before it is made. However, insurance policies are an expensive way to deal with this. An attachment order to the death-in-service benefit would achieve the same thing in an inexpensive and straightforward way. We should certainly do something about this as well.

Amendment No. 78 covers leftover business from the Pensions Act 2004. We decided, in part because we ran out of time, to exclude pension-sharing provisions from the Pension Protection Fund and the financial assistance scheme. Technically this was done because moneys from the PPF or FAS were compensation or a contribution to loss rather than the original pension. None the less, under the PPF an individual may receive 90 per cent of the original pension, and under FAS 80 per cent. That may represent a significant asset, one as valuable as the matrimonial home. For example, a PPF pension of £20,000 requires a pot of nearly £300,000. That sum would be excluded from any formal divorce pension-sharing arrangements. In other words, if you divorce before your company comes into the PPF, or even if you divorce during the assessment period, pension-sharing would be honoured. If you divorce a month or two later, after the company scheme has come into the PPF, it is not. The spouse’s access to a share of the pension, which may be more valuable than the home, is determined not by the circumstances of the divorce, not by the size of the assets involved, and not by any offsetting that may have taken place, but by the timing of the company’s fortunes. I do not think that that is fair. Virtually all other UK pensions are open to pension-sharing, including the basic state pension by substitution rules and the state second pension. It is unfair that pension pots coming through the PPF and FAS, which may be infinitely more generous than S2P, are excluded.

I ask my noble friend whether there is any possibility that in the course of this year or even in next year’s Bill we could bring forward regulations or whatever is necessary to rectify anomalies which, while they may affect only a small number, for those who are so affected are quite serious and were certainly never part of the intention and spirit of the original legislation, which had the support of the entire House. I beg to move.

7.15 pm

Baroness Morgan of Drefelin: I am grateful to my noble friend for raising the important issue of the part the Government play in enabling fair and equitable settlements on divorce. Indeed, she was the Minister responsible for introducing in this House the relevant provisions in the Welfare Reform and Pensions Act 1999. I am disappointed that the Chamber is slightly less full than it was earlier because I thought this would be a good moment to pay tribute to my noble friend on her record of campaigning for women’s pension rights. If they were still in their places, I am sure that other noble Lords would join me in that tribute.

I shall deal with Amendment No. 78 first. As my noble friend has described, it seeks to introduce new legislation to enable compensation from the Pension Protection Fund or assistance via the financial assistance scheme to be shared upon divorce. Of course, divorce settlements should be fair, which is why the legislation already ensures that the value of Pension Protection Fund compensation is taken into account by the court as an asset. The legislation also provides for situations where a court has already issued a pension-sharing order and enables the Pension Protection Fund to implement such orders notwithstanding that the pension scheme has been drawn into the Pension Protection Fund. Current legislation allows the value of a pension to be shared on divorce; however, once a party to a divorce is already receiving compensation, or assistance instead of a pension, the court has no powers to share any part of that with the other party.

I have great sympathy with my noble friend’s amendment and I am very interested in the cases she describes. Although the Government are not aware of anyone losing out currently, we are actively looking at what we can do to ensure that problems do not arise in future. As my noble friend is aware, this involves engaging with the devolved Administrations in Scotland and Northern Ireland to ensure that any measures we take work effectively across the different family law jurisdictions of the United Kingdom.

We also need to ensure that such provisions would work as intended and would not add unnecessary costs or burdens to individuals, the Pension Protection Fund or taxpayers. For this reason the Government do not believe that it is appropriate to introduce the relevant provisions into this Bill. Instead, any necessary legislation would form part of a Bill in a future Session when we have had time to consider properly what would be required to enable court orders to be made and implemented.

I hope my noble friend will accept my assurances that the Government are aware of the issues she raises and are working across government and with the devolved Administrations to identify fully any legislation that is necessary to ensure fair settlements where financial assistance scheme assistance or Pension Protection Fund compensation is involved.

Amendment No. 77 seeks to extend pension-sharing to those who have a pension arrangement within the terms of the Welfare Reform and Pensions Act but who live abroad and are divorced abroad, as my noble friend described. All current jurisdictional requirements require one or both of the parties to have been domiciled or habitually resident in England and Wales at some point during or since the marriage, or to have a matrimonial home here, hence providing a personal connection with England and Wales. We need to understand further why my noble friend considers that being a member of a UK occupational pension scheme is analogous to the condition of having a beneficial interest in a dwelling house. The latter requires the couple to have resided as a married couple in England and Wales at some point, while the former does not. I am advised that if this were the case it would open up our courts to applications for domiciliary relief on divorce abroad from those whose only connection with England and Wales is where their pension is based.

However, we are very happy to discuss this issue at a future date, when it would be important to involve not only the DWP but the Ministry of Justice, which has responsibility for matrimonial law.

Amendment No. 165 would allow the court to make both a pension-sharing order and an attachment order for a death-in-service lump-sum payment in respect of the same parties to a marriage and the same pension arrangement. As my noble friend knows, since the introduction of pension-sharing, divorcing couples have had to choose between attachment and pension sharing. Those who choose pension-sharing achieve a clean break and will become entitled to an income regardless of the circumstances of the other party. Income from an attachment order is not so secure; hence the issue of insurance raised by my noble friend.

The Government’s current interpretation is that to allow a former spouse to benefit from both a pension-sharing order and an attachment order would cut across the principle of a clean break. It would also add significantly to the complexity of administering the pension on divorce provisions, particularly if either party subsequently remarried and divorced again. By choosing pension-sharing a former spouse acquires an asset in her own right, which provides security of income at normal benefit age. Having made this choice, a former spouse cannot expect to retain the link, having made a clean break with the other spouse, that an attachment order implies. However, we are willing to consider this matter further to see if there is a substantive issue. Again, this needs to be discussed in more detail.

Having made my points on Amendment No. 78 in regard to FAS, and taking note that the issues my noble friend has raised are seen as interesting and important, I hope that she will consider withdrawing her amendment.

Baroness Hollis of Heigham: I am extremely grateful to my noble friend. She has taken on board the substance of the point that there are small loopholes left over which, in the flurry of activity, we did not necessarily cover at the time, and suggested a way forward. One is not asking for action tomorrow on this; none the less, some of these issues will grow in seriousness and notoriety as more and more people avail themselves of pension-sharing and then find themselves coming up against these little roadblocks, if I can call it that.

I am grateful to my noble friend, both for the warm way in which she has responded and for her suggestion of future talks, which, obviously, will engage the professionals who have to counsel people on how to handle divorce settlements. With my appreciation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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